Planning for in-home care is a lot like the Chinese adage about planting a tree: The best time was 20 years ago, and the second best time is today.
Older Americans determined to stay in their own homes are likely to need help at some point — for a few hours a day or 24/7 — with household chores, nursing services and personal care. And with the 65-plus population projected to grow from 56 million in 2020 to 73 million in 2030, the need for home health care will only increase.
Those who plan early may buy insurance policies that cover home-care benefits. That could be long-term care insurance, or a life insurance policy with a rider for long-term care, sometimes called hybrid policy.
That's if they can afford long-term care coverage. The average annual premium in 2021 for a couple who are both age 55 was $2,050 for a policy that would pay up to $165,000 of future care costs for each, according to the data from the American Association for Long-Term Care Insurance. (That's without inflation factored into payments; premiums can be considerably higher for policies that come with preset levels of inflation protection so future benefits reflect rising costs.) The averages for an individual man and woman at that age are $950 and $1,050, respectively.
Plus, about 1 in 5 applicants younger than 60 are declined, and the proportion of people denied coverage rises steeply with age, the trade group reports.
Those without long-term care insurance often start out relying on an unpaid family caregiver, but eventually many need to turn to paid help. And that can be expensive, too: According to insurance company Genworth's 2020 survey on the cost of long-term care, the national average bill for a home health aide is $4,576 a month.
"I think it's a crisis,” says Jennifer VanderVeen, president of the National Academy of Elder Law Attorneys. “Getting reliable home health care is not as available and affordable as it should be."
Paying out of pocket
"For the most part, the clients who have home care are private pay,” says Jerry Love, a certified public accountant in Abilene, Texas, and a frequent lecturer on financing retirement and long-term care for the American Institute of Certified Public Accountants.
Many cobble together a care budget from multiple sources, among them:
- Investments and savings
- Life insurance policies that can be used for qualified home-care expenses through cash value or an accelerated death benefit
- Borrowing, for example by taking out a reverse mortgage or home equity loan
Keep in mind that using your house to provide cash for long-term care is risky: You could run out of equity in your home while you still need the care, and reverse mortgages, complex financial tools available only to people age 62 and up, are a common subject of scams targeting older homeowners.