The Ins and Outs of Extended Care Insurance

Extended Care, By the Numbers

The Administration for Community Living found that a 65-year-old person today has roughly a 70% chance of needing some type of extended care in the future. The study also found that women need care longer (3.7 years) than men (2.2 years).¹

“Be prepared for emergencies,” wrote Mick Owens in his popular book Diamond of Life: The Five P’s of Success and Significance. “In addition to having a nest egg to produce the needed income, you will also need a bucket that is sitting there safely to be able to access in the event of emergencies.”

Mick explained that some people see market risk as the biggest threat to their retirement portfolios. However, he noted that the potential need for extended care or other unforeseen circumstances may be bigger risks.

The Ins and Outs

1. What Does Extended Care Cover? When people think of extended-care insurance, many quickly jump to a nursing home or assisted-living facility. But, in reality, 73% of people who receive some form of extended care received it at home.²
2. Medicare has limits. It’s critical to understand that Medicare will only pay for extended care at home under specific circumstances.
3. What to Look for in a Policy, Part I. Most policies are designed to pay a predetermined amount for each extended-care service; for example, $200 a day for nursing home care.
4. What to Look for in a Policy, Part II. Some policies combine extended-care coverage with a permanent life insurance policy. But before you move ahead, it’s important to determine whether a strategy involving life insurance works in your situation. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Before buying, be sure to have an understanding of the policy charges and fees.
5. What to Look for in a Policy, Part III. Remember, no decision is still a decision. It’s possible you may pay out of pocket for extended care if you haven’t made any other arrangements.

Hope is not a strategy when it comes to extended care. Take a proactive approach and develop a strategy so you can better understand what risks you are willing–and not willing–to take.