Study Finds 1 in 3 Long Term Care Insurance Policyholders Use Benefits

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As the need for long term care continues to increase, planning ahead for the high risk can help protect finances in retirement. A study by LTC Tree found that 1 in 3 Long Term Care Insurance policyholders use their benefits.

Long term care is a topic that is on the minds of more and more Boomers these days. With the approaching retirement crisis and the constantly rising cost of health care, planning for a big cost such as long term care can be difficult. Developing a strategy ahead of time is crucial, though, because the chances of needing long term care are much higher than people think, according to a new study by LTC Tree.

Many people question the chances they will need care one day and don’t bother planning because they assume they are healthier than average and will beat the odds. This can end up being a very costly decision considering the actual risk of long term care and the fact that health status can quickly change.

The LTC Tree Analytics department reviewed internal data and found that of all Long Term Care Insurance policyholders, 33% will use their benefits. The actual risk of needing long term care is around 50% for the general population, according to government statistics. Because some people only need care for a period of time shorter than the policy’s elimination period and some who will need care won’t have a policy to use, not every one will end up using benefits to pay for care.

So, of those people who were savvy enough to plan for the risk of long term care by taking out a policy, 1 in 3 will end up using that policy. 1 in 3 is an extremely high risk in any regard, but especially when it comes to long term care.

Because long term care is so expensive, individuals who find themselves in need of care often end up turning to a loved one for care or spending all their assets to qualify for Medicaid. Neither of these choices is likely what the average worker has planned for their retirement, which is why Long Term Care Insurance makes so much sense for someone with a nest egg to protect. Rather than try to save for the whole cost of care, an insurance policy allows the policyholder to transfer the financial risk to the insurance provider and not worry about stockpiling assets to prepare for that risk.

15% of policyholders will use their benefits for 1 year or less and another 18% will use their benefits for more than 1 year. After the 1-year threshold has been crossed, the average length of a Long Term Care Insurance claim is 3.9 years.

The risk of long term care is high, cautions LTC Tree, and it is a risk worth considering when making plans for a retirement portfolio. Most people spend their lives factoring in smaller risks and fail to notice the huge risk looming above their head until it becomes their reality. The small percentage of US seniors with a Long Term Care Insurance policy, about 10% according to Kaiser Health, demonstrates that well.

LTC Tree is an Atlanta-based nationwide network of licensed agents whose goal is to help educate people about their Long Term Care Insurance options with no face-to-face sales meetings. We have years of experience helping consumers find the best Long Term Care Insurance benefits for the lowest rates. We help clients shop all the major companies to find the best plan at the best price and strive to give consumers a laid back, no pressure process of buying insurance.

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Darrick Wilkins
LTC Tree
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