Is Long-Term Care Insurance Worth It in Colorado?

Summary:

Long-term care insurance (LTCI) can help Coloradans cover the high cost of non-medical care in later life. It’s not right for everyone, but it may offer value through coverage, tax deductions, and reduced burden on loved ones. A financial advisor can help evaluate your personal situation.

• Covers non-medical daily living help like bathing and dressing
• Policies have payout limits, waiting periods, and exclusions
• Some offer federal and Colorado tax benefits
• Annual premiums vary by age, health, gender, and coverage level
• A fiduciary advisor can help assess if LTCI suits your retirement plan

Is long-term care insurance in Colorado worth it? The simplest answer is that it can be. For some people, the additional coverage that this type of insurance provides can be worth the yearly premiums. For others, the investment may not provide a cost-effective return.

As is the case with so many financial decisions, and especially those that include a health-related or medical component, it’s simply not possible to say that long-term care insurance (LTCI) is or isn’t a worthwhile investment for everyone.

The choice comes down to a variety of individual factors. The upside is that a qualified financial advisor can help you decide on this coverage at the personal level as part of the larger holistic retirement planning process. Additionally, learning about types of LTCI, what this insurance covers and doesn’t cover, its costs, and more can support a more informed choice.

Keep reading for a breakdown of basic and important information about long-term care insurance, as well as answers to frequently asked questions about this type of coverage.

What You Should Know About Long-Term Care Insurance in Colorado

What is Long-Term Care Insurance?

Long-term care insurance is a product offered by insurance companies to address costs that generally aren’t covered by health insurance or Medicare. This form of insurance doesn’t apply to medical care itself. Instead, it is used to pay for services related to activities of daily living, as the US Department of Health and Human Services explains.

The ability to complete these activities alone can be impacted by age and a variety of medical conditions. Keep in mind that while the need for these services can grow more common with age, younger people may also require support with activities of daily living.

People with a reduced ability to engage in these activities by themselves can enlist the support of aides to assist them. They can also live in or regularly visit facilities that help them with these activities, like nursing homes, assisted living facilities, and adult daycare centers. In some cases, they may choose to modify and improve their home to make these activities safer and easier.

Working with those aides, modifying a home to be more accessible, or living in a facility that offers this support, and especially paying for such long-term care services for many months or years, can lead to significant costs. Relying on family members for support is possible in some circumstances, but providing long-term care can place a significant burden on loved ones.

These are the foundational issues that LTCI aims to address.

Examples of Services that Long-Term Care Insurance Can Help Pay For

Examples of activities of daily living that long-term care insurance can provide financial support for, in the form of providing payments to aides or facilities or making home improvements, include:

• Bathing, grooming, and maintaining personal hygiene
• Using the bathroom
• Moving around a home or living area
• Getting dressed
• Eating food and maintaining nutrition

Are There Limits or Exclusions for Long-Term Care Insurance?

A key factor when considering the value of long-term care insurance is the cap or limit placed on the amount a policy will pay. Most policies have some form of limits on payouts or compensation in place, including:

• A daily maximum that limits the amount the policy will pay per day for covered care.
• A policy maximum that can limit the total amount paid out by the policy or the length of time for which the policy provides coverage.
• Exclusions that prevent the policy from paying out for specific forms of care.
• A waiting period that requires the policyholder to pay for care themselves, such as 30 or 90 days, before the policy will begin paying out.

Are There Tax Advantages for Long-Term Care Insurance?

Although not all policies qualify, there are types of LTCI that allow the policyholder to deduct the cost of premiums from their federal income taxes. The IRS shares 2024 maximum deductions for qualified long-term care insurance policies. Note that the deductible amount increases with age.

In Colorado specifically, there is also a credit available for some residents with LTCI policies on their state income taxes. However, the Colorado long-term care insurance credit of $150 only applies to federal taxable income below $50,000 for a single policy and $100,000 for two policies or a single policy that covers both members of a couple.

How Much Does Long-Term Care Insurance in Colorado Cost?

There are many variables that impact the cost of long-term care insurance, although policies in Colorado generally range between several hundred and several thousand dollars in yearly premiums.

Overall, the cost of LTCI depends on many factors, including:

• The age of the policyholder when they take out the insurance. Starting at a younger age reduces the premium but means the policyholder will likely pay more over time before the policy begins to pay out.
• The health of the policyholder when coverage begins. Better overall health generally leads to a lower premium.
• The gender of the policyholder. Women generally live longer than men, so they often face higher premiums.
• The specifics of the coverage. A higher benefit or shorter waiting period will increase the premium, for example.

Is Long-Term Care Insurance Right for Me?

Long-term care insurance can provide a valuable, long-lasting benefit for some policyholders, but may cost more than the return it provides for others. It’s impossible to say whether a long-term care policy is the right choice on a general level because so many variables are involved.

However, it is possible to review your finances, health, expectations about needs in the future, and other factors to make this decision on a personal level. For a complex product like long-term care insurance, deciding whether it fits into broader financial plans for retirement can be challenging. A qualified financial advisor can provide helpful information and guidance.

Dechtman Wealth Management is proud to offer the services of fiduciary financial advisors, professionals who are bound by oath and law to put our clients’ interests first. By learning about your financial needs, goals, and plans for the future, our advisors can help you decide whether long-term care insurance is right for you.