You’re Not Too Young To Think About Long-Term Care Insurance
January 27, 2020
According to the AARP, 52% of the people who turn 65 today will develop a health condition that requires long-term care (LTC). Women tend to live longer and have more health problems, so they have higher odds: 58% may require care for more than 2.5 years. Most financial experts recommend that people purchase policies in their mid-50s. The benefits have time to grow, and younger, healthier people pay lower premiums.
Unfortunately, many people don’t seriously consider buying LTC insurance until they need it. That’s like trying to buy homeowner’s insurance while the wildfire or hurricane is headed straight for your property. For people 60+, the sticker shock for an LTC policy can be considerable. That’s if they’re lucky enough to buy a policy. One-fourth of applicants age 60-65 and almost half of older applicants are rejected, usually for health issues.
No matter what your age, it’s never too early to start thinking about long-term care insurance.
Why You May Need LTC Insurance
Most people want to age in place and stay independent as long as possible. Assistance from home health aides, meal deliveries, housekeeping help, etc. makes that easier. Although recent Medicare Advantage plan changes may allow seniors to get short-term home care, LTC expenses add up quickly.
Whether it’s private or publicly-funded, health insurance only covers long-term care in specific circumstances. The additional costs are all out-of-pocket if you don’t have LTC insurance.
Here are the services generally covered by health and disability insurance, according to the US Department of Health & Human Services (HHS):
- Like Medicare, the skilled nursing stay must follow a recent hospitalization for the same or related condition and is limited to 100 days
- Coverage of home care is also limited to medically necessary skilled care
- Most forms of private insurance do not cover custodial or personal care services at all
- Your plan may help you pay for some of the copayments or deductibles that Medicare imposes. For example, your plan may help cover the $137.50 per day for Medicare covered nursing home care for days 21 through 100
- Medigap insurance coverage does not extend to long-term care coverage
Even if Medicaid covers the services you need, the agency may require “reimbursement” from your estate or heirs for benefits paid to you. This process is called “estate recovery.” Federal law allows states to set their own parameters for what types of expenses and dollar amounts that can be recovered.
An LTC policy can help you comfortably age-in-place, conserve assets, and protect your heirs.
Types of Long-Term Insurance
You can choose between different types of LTC policies.
Comprehensive LTC Policies
Comprehensive policies cover long-term care expenses for services received in nursing facilities, assisted living facilities, adult day care centers, and/or at home. Non-comprehensive policies restrict benefits to services provided in nursing facilities. Some providers call a non-comprehensive LTC policy “nursing home insurance.”
Because they cover more, comprehensive policies are generally more expensive, but also offer you more choices for how you receive care.
Life Insurance with an LTC Rider
There’s no guarantee that you’ll need long-term care, so many people choose an asset-based or hybrid life insurance policy that pays a defined level of LTC expenses. The benefit payments are deducted from the total value of the life-insurance policy. These policies pay for expenses not covered by other insurance.
When you buy, most policies allow you to choose between a single, lump-sum payment or a series of large annual premiums paid over several years. They often require medical underwriting, meaning you may have to submit medical records and answer questions about family history and/or undergo a physical exam.
Group & Employer Policies
Check with your employer or professional organization about the availability of employer-based or group LTC insurance, particularly if you have pre-existing health issues. The premiums are usually lower than individual policies. Everyone pays the same premium because the risk is spread across the group.
Look carefully at the policy and ask a lot of questions. Most group policies offer limited coverage options, so make sure you know what you’re buying. Your employer may contribute to the cost, and you can usually take the policy with you when you change jobs or retire. However, you will have to assume the employer portion of the payment in addition to your contribution.
Get Professional Advice before Buying
There are many variables and options to consider with LTC policies – not the least of which is that insurers can raise premiums later! Always talk with your financial planner or an independent insurance agent before you purchase.
- Certified financial planners help you “run the numbers” to determine how much coverage and premiums you can afford – or even if you actually need to buy LTC insurance at all. Review the Wall Street Journal’s recommendations for choosing a financial planner.
- Independent insurance agents help you choose between policies offered by various insurance companies. LTC insurance is just like car insurance: prices vary widely by company, location, coverage levels, etc. An experienced agent will direct you towards companies likely to accept your application and offer the best price.
Even if your employer offers what seems like a great deal for LTC insurance, always check your options. When you buy LTC insurance, you’re making a large investment in your future. Take your time, understand your options, and find the best fit for you and your family.
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