For all intents and purposes, U.S. adults generally plan wisely for that “rainy day” which happens to all of us. For many, there are a lot of “rainy day” events to prepare for because our parents instill in us while growing up that life ain’t always grand.
Once we reach adult age and are out of our parents’ households, we begin to think logically (most of us, anyway) and begin preparing our lives as adults, which we know (deep down) can be risky.
When we buy a car, we insure it. When we start working, we insure our health against illness and injury and we start a family, we buy life insurance to financially protect our family. Makes sense, right?
But, what many hard-working and ladder- climbing adults sometimes forget to consider is: what happens if I need long-term care or have to spend time in a nursing facility, how am I going to pay for that?
What is Long-Term Care Insurance?
Long-Term Care Insurance (LTC) is insurance coverage that helps pay to costs for nursing home care, adult daycare, and home health care if the insured requires long-term treatment for a chronic or disabling condition. It is the alternative to public assistance programs that typically fall short of providing the best care or facility possible.
Most individuals and families consider LTC to be too expensive to fit into a typical family’s budget. However, the alternative of paying out-of-pocket or spending down to qualify for Medicaid is not what you want to consider.
Here’s the average cost of long-term care services nationally:| Home Health Aide | Homemaker Services | Adult Daycare | Assisted Living Care | Nursing Home Care |
|---|---|---|---|---|
| $50,336 | $48,048 | $18,720 | $48,000 | Semi-Private $89,297 Private $100,.75 |
How Does Long Term Care Insurance Work?
Long-term care insurance steps in when you have a qualified claim. Your policy will pay a monthly benefit for your LTC costs for a certain time period (benefit period) stated in the policy. You will have an elimination period (waiting period) that you have selected when you purchased coverage before your benefits will begin.
With traditional LTC policies, the insured becomes eligible for benefits when they are unable to do at least two of six activities of daily living (ADL) or if you are experiencing dementia or some other form of cognitive impairment like Alzheimer’s.
The traditional activities of daily living that your insurer will consider are:
- Eating
- Bathing
- Caring for incontinence
- Getting dressed and undressed
- Transferring (the ability to get out or in a bed or chair)
- Toileting (the ability to get on or off of a toilet)
If you require help and need care you would file a claim with your insurer who would then evaluate your circumstances and then approve a plan of care created by your physician and begin paying out your benefits when other benefits you might have are exhausted and your elimination period has expired.
You will receive your benefits until you have recovered or reached your maximum benefit level, whichever occurs first.
Who Needs Long Term Care Insurance?
Any person who lacks the resources to pay for long-term care out-of-pocket should consider long-term care insurance. According to AARP’s Public Policy Institute, 52% of adults turning 65 will eventually need long-term care services that can easily financially devastate an individual or family. Many seniors who have spent their lives saving for retirement put their retirement income at risk by not preparing in advance for the risk of needing long-term care services.
If you are thinking that Medicare will pick up all of your long-term care services costs, you are mistaken. If you think Medicaid will be an option, good luck finding a good healthcare provider or healthcare facility that is willing to accept Medicaid.
Doctors across the country are refusing to accept Medicaid patients and many have started to decline Medicare patients as well. Knowing this, it is incumbent upon you and your spouse, if married to consider Long-term care insurance to protect your retirement assets.
Types of Long Term Care Insurance to Consider
Traditional Long-Term Care Insurance Policy
The insurance industry has responded to the risk exposure of individuals and couples who want to protect their assets in the event they need long-term care services. Although most stand-alone LTC policies carry the same basic coverage, some carriers offer additional (optional) coverage so the policyholder can broaden their coverage and reduce their risk.
Currently, a traditional long-term care policy that provides a $161 per day benefit costs on average about $2,700 per year (LifePlans, Inc. Survey). Applicants can also elect an inflation rider that will increase your benefit so that your policy keeps up with inflation.
Your cost for traditional Long-Term Care Insurance is based on four primary factors:
- Your elimination period (waiting period before benefits begin)
- Your benefit amount
- Maximum length of benefits
- Your personal underwriting (age, gender, medical history)
Your age and health condition have the most impact on your annual premium so it makes great financial sense to purchase long-term care coverage earlier instead of waiting until you’re in your sixties and already have health issues.
Life Insurance with a Long-Term Care Rider
Many life insurance companies today have begun offering a type of Long-Term care rider to insurance policies. These riders are becoming very popular because the cost of the rider is so much lower than the cost of a stand-alone LTC policy.
When your life insurance policy has the LTC rider and you qualify for the LTC benefit, the insurance company will advance you (the insured) a large portion of your death benefit to help cover the costs of your long-term care services. The amount of the advance will be deducted from the death benefit before it’s paid to your beneficiaries.
But, if you never have to use the LTC benefit, your beneficiaries will receive the full death benefit in your policy. So, in this case, if you don’t use it, you don’t lose it.
How to Get the Best Long-Term Care Insurance Rates?
Although most long-term care insurance policies are very similar, the primary difference is in the rates that insurance companies charge for coverage. This means that you can either call every company who offers LTC insurance or call an experienced and reputable independent insurance broker like Intramark Insurance Services (instantquotelifeinsurance.com) who will shop your long-term care insurance coverage with all of the highly-rated and most competitive insurance companies.