Planning for long-term care means thinking about how to cover the costs of home care, assisted living, or a nursing facility if the need arises. Many assume Medicare will pay for these expenses, but coverage is limited. Without a plan, long-term care costs can quickly deplete savings, putting financial pressure on you and your loved ones. Some choose to buy insurance to manage these expenses, while others rely on personal savings. Each option has advantages and risks, and the right choice depends on your financial goals and comfort with uncertainty.
Understanding Long-Term Care Insurance
Long-term care insurance helps cover the costs of care that Medicare and standard health insurance won’t pay for, such as in-home assistance, assisted living, and nursing home stays. With the high cost of care in Massachusetts, this type of coverage can provide financial relief and protect assets. Policies vary, offering different levels of benefits, coverage limits, and waiting periods before payments begin.
Premiums depend on factors like age, health, and the level of coverage selected. Some policies remain fixed in price, while others can increase over time. Massachusetts offers incentives for certain policies, such as the Medicaid Partnership, which allows policyholders to protect more of their assets if they later need Medicaid.
Pros of Long-Term Care Insurance
Long-term care insurance offers several benefits, especially for those who want to protect their savings and ensure access to quality care. Some of the key advantages include:
- Protects assets – Helps cover the high costs of long-term care, reducing the risk of depleting savings.
- Offers flexibility – Provides coverage for various types of care, including in-home assistance, assisted living, and nursing facilities.
- Reduces family burden – Eases financial and caregiving responsibilities for loved ones.
- Medicaid asset protection – Certain policies in Massachusetts allow policyholders to shield more assets if they later apply for Medicaid.
- Provides financial predictability – Helps manage future costs with a structured plan.
Cons of Long-Term Care Insurance
While long-term care insurance can provide financial protection, it also comes with drawbacks that should be considered:
- High premiums – Costs can be expensive, especially for older applicants or those with pre-existing conditions.
- Rising rates – Premiums may increase over time, making it harder to maintain coverage.
- Strict eligibility requirements – Some policies have medical underwriting, which can make it difficult to qualify.
- Limited benefits – Many policies have caps on daily or lifetime payouts, which may not fully cover care expenses.
- Risk of never using it – If long-term care is never needed, the money spent on premiums won’t be recovered.
Self-Insuring: Using Personal Savings for Care
Self-insuring means relying on personal savings, investments, or other financial assets to cover long-term care costs instead of purchasing insurance. This approach offers flexibility, allowing you to use funds as needed without the restrictions of an insurance policy. Some people set aside dedicated savings, while others plan to use home equity or investment returns to help cover future expenses.
In Massachusetts, where long-term care costs are among the highest in the country, self-insurance requires careful planning. A single year in a nursing home can cost well over $100,000, so it’s important to have sufficient funds available. Those who choose this approach must consider potential risks, such as market downturns or unexpected medical expenses that could deplete savings faster than anticipated. Proper financial planning is key to making self-insurance a viable option.
Pros of Self-Insuring
Self-insuring offers several advantages for those who prefer to manage their own long-term care expenses:
- Full control of funds – You decide how and when to use your money without restrictions from an insurance policy.
- No premium payments – Avoids the ongoing cost of insurance, keeping more money available for other needs.
- No eligibility concerns – No risk of being denied coverage due to age or health conditions.
- Retained assets – If long-term care is never needed, savings remain available for other purposes or to pass on to heirs.
- Investment growth potential – Funds set aside may continue to grow, increasing available resources.
Cons of Self-Insuring
Self-insuring comes with significant risks that should be carefully considered:
- High costs – Long-term care expenses in Massachusetts can quickly deplete savings, especially for extended care needs.
- Unpredictability – No way to know in advance how much care will be needed or for how long.
- Market risks – Investments intended to cover care costs may lose value due to market downturns.
- Family burden – Without a structured plan, loved ones may have to step in to manage care and finances.
- Medicaid limitations – If assets run out, Medicaid eligibility rules may require spending down savings before assistance is available.
Which Approach is Right for You?
Choosing between long-term care insurance and self-insuring depends on your financial situation, health, and personal preferences. If protecting assets and ensuring predictable coverage is a priority, insurance may be the better option. However, if you have significant savings and prefer to keep control over your funds, self-insuring might work for you.
Some people combine both strategies, using insurance for part of their expected costs while maintaining savings for flexibility. Massachusetts residents should also consider Medicaid planning and asset protection options.
Planning for the Future
Planning for long-term care is a critical step in protecting your future and your assets. Whether you choose insurance, self-insuring, or a combination, having a strategy in place is key. At Surprenant & Beneski, P.C., we can help you explore your options. Contact us today to get started.
