Long term care insurance
Long-term care insurance is a type of insurance that provides coverage for services that are not covered by regular health insurance. These services include assistance with routine daily activities such as bathing, dressing, or getting in and out of bed. Long-term care insurance policies help cover the costs of care when you have a chronic medical condition, disability, or disorder such as Alzheimer’s disease. In this article, we will explore what long-term care insurance is, what services it covers, how it differs from regular health insurance, and why it is important to consider when planning for your future.
What is long-term care insurance?
Long-term care insurance is a type of insurance that provides coverage for services that are not covered by regular health insurance. These services include assistance with routine daily activities such as bathing, dressing, or getting in and out of bed. Long-term care insurance policies help cover the costs of care when you have a chronic medical condition, disability, or disorder such as Alzheimer’s disease.
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What services are covered by long-term care insurance?
Long-term care insurance policies will reimburse you for care given in various places, such as your home, a nursing home, an assisted living facility, or an adult day care center. The services covered by long-term care insurance include:
– Assistance with routine daily activities such as bathing, dressing, or getting in and out of bed
– Skilled nursing care
– Physical, occupational, or speech therapy
– Homemaker services such as meal preparation, cleaning, or laundry
– Personal care, such as help with toileting or incontinence care
– Respite care for caregivers
How is long-term care insurance different from regular health insurance?
Long-term care insurance differs from regular health insurance because it covers services not covered by regular health insurance.
Regular health insurance covers medical expenses such as doctor visits, hospital stays, and prescription drugs. Long-term care insurance, on the other hand, covers the costs of long-term care services not covered by regular health insurance.
Why is long-term care insurance important?
Considering long-term care costs is an important part of any long-range financial plan, especially in your 50s and beyond. Waiting until you need care to buy coverage isn’t an option. You won’t qualify for long-term care insurance if you have a debilitating condition, and long-term care insurance carriers won’t approve most applicants older than 75.
Most people with long-term care insurance buy it in their mid-50s to mid-60s. Long-term care insurance is important because it offers peace of mind, knowing that you won’t drain your assets or put undue pressure on family members.
Why do you need long-term care insurance?
Long-term care insurance is an important consideration for anyone planning for their future. Here are some reasons why you need long-term care insurance:
Statistics on the likelihood of needing long-term care
According to the Urban Institute and the U.S. Department of Health and Human Services, the average 65-year-old today has a 70% chance of needing some long-term care eventually. Of those who need it, most would use it for about two years, but around 20% would require it for more than five years. These statistics show that the likelihood of needing long-term care is high, and it is important to plan for it.
The high cost of long-term care
Long-term care is expensive, and the cost is only increasing. The average cost of long-term care insurance is $1,200 a year for a 60-year-old man for $165,000 coverage. However, the cost of long-term care insurance varies by age, health, coverage amount, and other features. In 2021, 55-year-olds paid about $102 per month on average for $165,000 in level benefits. The cost of long-term care insurance can be expensive, especially if you have health issues, and typically increases as you age. An insurance company may approve you for a long-term care insurance policy if you’re in poor health, but you would likely pay higher rates than other members.
How long-term care insurance can protect your retirement savings
Long-term care insurance can protect your retirement savings by covering the costs of long-term care services not covered by regular health insurance. Without long-term care insurance, you may have to pay for long-term care services out of pocket, quickly depleting your savings. Long-term care insurance offers peace of mind, knowing you won’t drain your assets or put undue pressure on family members.
How to choose a long-term care insurance policy
Choosing a long-term care insurance policy can be a complicated process, but there are several factors to consider to ensure that you choose the right policy for your needs. Here are some factors to consider when choosing a long-term care insurance policy:
Factors to consider when choosing a policy
– The daily benefit amount: This is the amount of money the policy will pay per day for long-term care services. You should choose a daily benefit amount that will cover the cost of care in your area.
– The amount of inflation protection: Inflation protection ensures that your benefits keep pace with the rising cost of care. It would help if you chose a policy with inflation protection to ensure your benefits don’t lose value over time.
– The length of benefit payments: This is the length of time the policy will pay for long-term care services. It would help if you chose a policy with a benefit period that matches your needs.
– The waiting period before benefits begin: This is the time you must wait before the policy starts paying for long-term care services. You should choose a waiting period you can afford to pay out of pocket.
– Your current age: The younger you are when you buy long-term care insurance, the less expensive the premiums will be.
How to determine how much coverage you need
To determine how much coverage you need, consider the cost of long-term care services in your area and how much you can pay out of pocket. It would help if you also considered your family and health history to determine your likelihood of needing long-term care services.
How to compare policies from different insurance companies
When comparing policies from different insurance companies, consider the above factors and compare the policies based on their coverage, benefits, and costs. It would help if you also researched the financial strength and reputation of the insurance companies to ensure that they can pay out claims when needed.
How to buy long-term care insurance
Buying long-term care insurance can be a complex process, but there are several steps you can take to make it easier. Here are some tips on how to buy long-term care insurance:
When to buy long-term care insurance
The best time to buy long-term care insurance is in your 50s or early 60s, when you are still healthy, and premiums are more affordable. Waiting until you are older or have health issues can make it more difficult to qualify for coverage and increase the cost of premiums.
How to apply for long-term care insurance
To apply for long-term care insurance, you must complete an application and answer health questions. The insurer may also ask to see your medical records or require a medical exam. It is important to be honest when answering health questions, as misrepresentations could result in a denial of coverage or cancellation of the policy.
How to work with an independent insurance agent to find the right policy
Working with an independent insurance agent can help you find the right long-term care insurance policy for your needs. An independent agent can provide you with quotes from multiple insurance companies and help you compare the coverage, benefits, and costs of each policy. Here are some steps to take when working with an independent insurance agent:
– Research potential agents to find one with experience in long-term care insurance.
– Schedule a meeting with the agent to discuss your needs and budget.
– Ask the agent to provide you with quotes from multiple insurance companies.
– Compare the coverage, benefits, and costs of each policy to determine which one is right for you.
– Ask the agent to explain any terms or conditions you don’t understand.
How to use long-term care insurance
Using long-term care insurance can be a complex process, but there are several steps you can take to make it easier. Here are some tips on how to use long-term care insurance:
How to file a claim
To file a claim, you must contact your insurance company and provide them with the necessary information, such as your policy number and the care details you received. The insurance company will then review your claim and determine whether it meets the requirements for coverage. If your claim is approved, the insurance company will pay for the covered services directly to the care provider.
How to choose a care provider
Long-term care insurance policies typically allow you to choose your care provider, whether a nursing home, assisted living facility, or home health care provider. When choosing a care provider, consider factors such as the quality of care, the cost of care, and the provider’s location. You should also ensure that the care provider is licensed and meets the requirements of your insurance policy.
How to manage your policy over time
It is important to review your long-term care insurance policy regularly to ensure that it still meets your needs. You should review your policy whenever you experience a major life change, such as a marriage, divorce, or death in the family. You should also review your coverage once a year with a licensed insurance agent to ensure that your policy still provides the coverage you need at a price point you can afford. If your long-term care coverage includes a compound inflation rider or a purchase option, it is especially important to review your policy regularly.
Alternatives to long-term care insurance
Long-term care insurance is not the only way to pay for long-term care services. Here are some alternatives to long-term care insurance:
Self-fund with savings
One alternative to long-term care insurance is to self-fund with savings. This means setting aside money for long-term care services in a high-yield savings account or retirement plan. While this option can be cost-effective, it requires careful planning and budgeting to ensure you have enough money to cover the cost of care.
Short-term care insurance
Short-term care insurance is another option for those who do not want to pay ongoing premiums for a product they may never use. Short-term care insurance typically offers coverage for up to a year and is easier to qualify for than long-term care insurance. However, the coverage is limited and may not be sufficient for those who need long-term care services for an extended period.
Annuities with long-term care riders
Annuities with long-term care riders are another alternative to long-term care insurance. With this option, you provide an insurer with a one-time lump sum, and in return, they give you consistent income for the rest of your life. If you need long-term care services, the annuity will pay for them, and if you do not, the annuity will continue to provide income. However, this option can be expensive, and the income provided may not be enough to cover the cost of long-term care services.
Critical care insurance
Critical care insurance is a type of insurance that pays a lump sum if you are diagnosed with a critical illness such as cancer, heart attack, or stroke. This lump sum can be used for long-term care services if needed. However, this option may not provide enough coverage for those who need long-term care services for an extended time.
Reverse mortgage on your home.
A reverse mortgage on your home is another option for those who need to pay for long-term care services. With a reverse mortgage, you can borrow against the equity in your home to pay for long-term care services. However, this option can be expensive, and you may need to sell your home to repay the loan.
Long Term Care Insurance Premium Dataset
| Insurance Company | Estimated Average Annual Premium for a 55-year-old male ($165,000 policy) |
|---|---|
| Mutual of Omaha | $1680 |
| Northwestern Mutual | $1720 |
| State Farm | $2290 |
| Genworth Financial | $2000 |
| Bankers Life | $2100 |
| National Guardian Life | $2400 |
| New York Life | $1850 |
| Thrivent | $2500 |
| Lincoln Financial Group | $2100 |
| Nationwide | $2400 |
| Average | $1950 |
Please note that the actual premium may vary based on the specific terms of the policy, the health of the individual, and other factors. For the most accurate information, it’s recommended to get a quote directly from the insurance companies.
Long Term Care Insurance FAQs
What is long-term care insurance?
Long-term care insurance helps cover the cost of services and support for individuals who need assistance with daily activities, such as bathing, dressing, or eating, due to chronic illness, disability, or aging.
Who should consider purchasing long-term care insurance?
Long-term care insurance is suitable for individuals who want to protect their assets and savings from the high costs of long-term care. It is often recommended for those in their 50s or 60s who are in good health.
What does long-term care insurance cover?
Policies typically cover services like home care, assisted living facilities, nursing home care, adult daycare, and respite care. It may also cover modifications to your home to help you live independently.
How much does long-term care insurance cost?
The cost varies based on factors such as age, health status, and the type of coverage chosen. On average, a policy for a healthy individual in their 50s may range from $1,500 to $3,500 per year.
When should I buy long-term care insurance?
The best time to buy is when you are in your 50s or early 60s, as premiums are lower, and you are more likely to be approved. Waiting until later can increase costs and the likelihood of being denied due to health conditions.
Can I use my health insurance or Medicare to cover long-term care costs?
Health insurance and Medicare generally do not cover long-term care costs beyond limited skilled nursing or rehabilitation services. Long-term care insurance fills this gap by providing coverage for ongoing personal care services.
Are there tax benefits to having long-term care insurance?
Yes, premiums paid for qualified long-term care insurance policies may be tax-deductible, depending on your age and other criteria. Benefits received from the policy are generally tax-free.
What is an elimination period in long-term care insurance?
The elimination period is the waiting period before your policy starts paying benefits after you begin needing care. It usually ranges from 30 to 90 days. The longer the elimination period, the lower the premium.
Can long-term care insurance premiums increase over time?
Yes, premiums may increase over time due to changes in the insurance company’s claims experience, but they cannot increase based on an individual’s health or age after the policy is issued.
What happens if I never use my long-term care insurance benefits?
Some policies may offer a return of premium or death benefit option, which refunds a portion of your premiums or provides a payout to your beneficiaries if you do not use the benefits.
Is it possible to customize my long-term care insurance policy?
Yes, most insurers offer various options to customize your coverage, such as choosing the benefit amount, elimination period, and inflation protection to keep pace with rising costs.
Does long-term care insurance cover care for Alzheimer’s or dementia?
Yes, long-term care insurance typically covers cognitive impairments like Alzheimer’s or dementia, ensuring you receive the necessary care in a specialized facility or at home.
What should I look for when choosing a long-term care insurance policy?
Consider factors like the benefit period, daily benefit amount, inflation protection, elimination period, and whether the policy covers different types of care settings, such as home care or assisted living.
Can I purchase long-term care insurance if I already have a chronic condition?
It depends on the condition. Some insurers may decline coverage for certain pre-existing conditions, while others may offer policies with higher premiums. It's best to explore options early while in good health.
What are the alternatives to traditional long-term care insurance?
Alternatives include hybrid policies that combine life insurance or annuities with long-term care benefits, as well as health savings accounts (HSAs) and Medicaid planning for those who may qualify.
Blake Insurance Group
Phone: (888) 387-3687
Email: [email protected]
Hours: Mon-Fri 9:00 am to 5:00 pm
Sat-Sun: Closed
Blake Nwosu
Owner & Principal Agent