Much of the information found online related to long-term care insurance planning is old, out-of-date, and, frankly, pretty irrelevant. That’s especially true if you’re what I mean as a single older woman. She is someone who is over 50, currently single, divorced, or widowed. Perhaps worst of all, little information offers valuable insight into ways to reduce the cost of this important form of future protection.
Lonely women have a special need to consider long-term care planning. Note that I have not said long-term care insurance here, just emphasizing the planning aspect. This is why.
First, it is a commonly known fact that women are much more likely to live a long life. The last life expectancy for women is 84 (2018 statistic). But this is actually a bit tricky. A woman who turns 65 today can expect to live, on average, to 86.7. She makes it to 80 and you have a better chance of making it to 90, 100 or even more.
Living a long life brings a variety of consequences. Perhaps the greatest is the very real risk of needing long-term care services at some point towards the end of your life.
The second reason that single women face a very real need to plan is that, unlike their counterparts who are married or in partnership, single women do not have what many refer to as that built-in caretaker. Contrary to what most people associate with the term long-term care, most care is provided in the home, and much of it may be provided by a spouse or partner.
Therefore, for older women alone, long-term care planning is essential. But that current planning can be misleading when you base your decision on older data and information.
According to AALTCI, the national industry trade organization, here are some current facts women should know.
Women have a much greater need for long-term care services. About 68 percent of all long-term care insurance policy claims are made by women.
More than a third of long-term care insurance claims made by women are for services received in their own home. Only 20 percent are for care in a skilled nursing facility.
Because women are more likely to need long-term care and file more claims than men, women pay more for comparable long-term care insurance policies, often up to 40 percent more.
For all of these reasons, women would benefit from taking a slightly different approach when considering long-term care insurance. Unlike what many refer to as the ‘out of the box’ product recommendation, it is typically not presented. This describes the following basic policy provisions, an initial benefit amount of $150 per day, a 3-year policy provision along with three percent annual growth in benefits to keep pace with inflation.
For single women, some long-term care insurance protection will always be better than none at all. Having some will provide faster access to care, greater choice in terms of caregiver selection, and care options. By some insurance, we mean having insurance to pay a portion of the cost using retirement savings and Social Security or other retirement income as a supplement.
An analysis of long-term care insurance prices conducted in January 2019 found that the out-of-the-box approach for a single 60-year-old woman would cost nearly $3,000 a year. A price that many single women on a fixed income simply cannot afford or choose not to pay. So they go without any plan.
Rather, here are two more affordable options worth considering. A policy valued with an initial monthly benefit of $3,500 that grows at three percent per year with a benefit that grows from an initial $84,000 at age 60 to $198,000 at age 90. This can be a significant amount of insurance benefits to cover home care, and certainly many months if skilled nursing care is needed in a home. The annual premium cost would be $1,800 per year. This equates to an annual savings of 40 percent and an amount of coverage that may well be enough for many women and will certainly be better than no coverage at all.
However, consider a larger set of benefits that start at $175,000 at age 60 and grow to $265,000 at age 90 thanks to a 1.5 percent annual inflation growth option. That benefit will still cost less than $2,150 per year, a 28 percent savings compared to the out-of-the-box approach.
The bottom line for women alone is considering much more than the standard approach to purchasing a long-term care insurance policy. You have the right to request multiple examples of policy illustrations and pricing from the insurance professional you work with. Ask them to propose a good, better, and better scenario with low, medium, and high monthly premium costs.
At the end of the day, armed with this information, you will be able to make a better informed decision that will benefit you both today and in the future.