The baby boomer generation is heading into choppy and uncharted waters when it comes to their long-term care needs. By 2020, nearly 55 million Americans will be age 65 or older, and life expectancy continues to rise. In recent years, analysts have noted the impact of elder care on the so-called “sandwich generation”: adults who were responsible for their aging parents and their own children. With ever-increasing life expectancies, the sandwich generation of the future may well refer to 70-year-olds caring for their 90-year-old parents, or working-age adults helping two generations above them. With the looming prospect of serious long-term care needs, it is critical that individuals and families take their personal financial planning seriously and have a plan to pay for a long-term care event.

For many families, long-term care insurance (LTCI) can make a difference. LTCI coverage directly addresses the cost of caring for the elderly or disabled, in the setting that best suits your wants and needs. Whether the setting is your home, an assisted living facility or a nursing home, LTCI benefits supplement other income and assets to minimize the impact of those expenses.

Customer Study: LTCI Protects Care for 97-Year-Old Great-Grandmother

Ruth is a 97-year-old great-grandmother who purchased an LTCI policy 18 years ago at the behest of her son. Three years ago, still living independently, she recognized that she needed help with her activities of daily living and moved into an assisted living facility using her LTCI benefits.

Last year, he was diagnosed with dementia. She was transferred to the center’s dementia unit, where she receives 24-hour care and continues to receive LTCI benefits. The current cost of her care is $6,900 per month. Her LTCI benefit pays $150 per day, or $4,500 per month, about 65% of her LTC costs. The remaining $2,400 is taken monthly from her social security benefits and savings.

Assuming you continue to collect benefits, you will have collected $216,000 at the end of your four-year benefit period. Now with the premium waiver, Ruth has paid a total of $48,900 in premiums since the inception of the policy. Her LTCI policy has allowed him to pay for her care without depleting her savings and getting Medicaid.

Is LTCI a good option for you or your family?

Here are a handful of considerations that should be part of your discussion:

Learn about the realities of long-term care. Ready for sticker shock? The average cost of a private room in a nursing home now exceeds $90,000 per year, and the average nursing home stay lasts nearly three years. Government insurance programs other than Medicaid do not address long-term care problems.

Plan ahead, much later. LTCI premiums are more affordable when people sign up while they are still relatively young and healthy. LTCI buyers in their 40s or 50s can pay thousands less per year than older buyers, and few companies will write policies for people over 75. Health and family history will also affect the cost of premiums and the availability of coverage.

Take care of mom. Most of us are familiar with the fact that women tend to live longer than men. Industry statistics show that 71% of new claims are from women. As a result, women’s LTCI premiums tend to be higher than men’s (unlike life insurance, where women tend to pay lower premiums). However, the investment is worth it considering the higher potential expenses they face. As mentioned above, buying LTCI at a relatively young age can help lower premiums.

Customize a plan that fits your needs. LTCI products are available to fit very specific priorities. Options abound in terms of amount of coverage, deductibles (commonly known as eligibility waiting periods), benefit increase options that take inflation into account, and specialized shared plans for couples. Insurance advisors often put together plans bundled with annuities or life insurance, taking advantage of tax laws for both traditional and asset-based plans. These tax advantages may include tax-free LTC benefits and/or tax-free 1035 exchange for asset-based life/annuity plans with an LTC rider.

Obviously, experienced guidance is a must when considering these factors. Buyers should look for insurance professionals with a strong LTCI background who can fully describe the benefits and limitations of a plan. It makes sense to consult experts in your community; Costs can vary widely by geography, and these experts will have the best access to accurate and relevant information.

We all must face the real changes that occur as we age and consider how best to protect our assets and our families. For those with the foresight, ability, and commitment to establish that protection, LTCI is a proven strategy that works.