Long Term Care Insurance
Long Term Care Health Insurance Guide
It's easy to take daily activities like dressing, feeding, and bathing yourself for granted. However, if you live long enough or become debilitated by sickness, you may be unable to do these activities on your own. Paying someone to assist you with these activities can rapidly become prohibitively expensive.
Purchasing long-term care insurance early in life can help you avoid having to pay these fees out of pocket. Because long-term care expenditures are typically not covered by health insurance, purchasing a long-term care insurance policy might be a wise investment to safeguard you as you age. According to the United States Department of Health and Human Services, 70% of persons aged 65 and more will require some form of long-term care at some point in their lives.
This handbook is a useful resource for learning about long-term care insurance alternatives and planning for the future.
What is long term care insurance?
Long-term care insurance is coverage that pays for assistance for someone who is unable to care for themselves. People who require this care include disabled adults and those suffering from a chronic illness or a debilitating injury.
What Does Long Term Care Insurance Cover?
Is assisted living covered by long-term care insurance? Will it cover home health care or a health aide? In the majority of circumstances, the answer is yes.
Long-term care policies often provide extensive coverage, allowing you to utilize the benefits of long term care insurance to a wide range of care. Long-term care insurance may cover the following:
- Assisted living facilities: This may include resident care or alternative care.
- Care at a nursing home
- Adult day care services
- Independent living
- In-home care: Policies may include assistance from a home health aide with daily home care activities, as well as nursing care, physical therapy, and medical equipment.
- Hospice: Long-term care insurance may cover short-term hospice care for terminally sick patients. Most hospice care, on the other hand, does not qualify as long-term care and may be funded by Medicare.
It's crucial to keep in mind that your long-term care insurance policy may not cover pre-existing conditions during the exclusion period, which might last many months after you purchase your policy.
Long-term care insurance does not cover medical expenses, though Medicare will if you qualify.
How Does Long Term Care Insurance Work?
You begin by completing an application, just as you would for any other insurance coverage. You'll also be asked certain questions about your medical history during the interview, and you may be asked to provide medical records so the insurer can determine your eligibility. There are no age restrictions for purchasing long-term care insurance.
If you meet the benefit criteria for most policies, these are the reasons you would qualify for long term care insurance.
If you can't perform at least two of the six "activities of daily living," or ADLs. These are some examples:
- bathing
- dressing
- eating
- getting in or out of a bed or chair
- getting on or off the toilet
- bladder and bowel control
When to Buy Long Term Care Insurance
When should you purchase long-term care insurance? Financial advisors agree that the best age to acquire insurance is between the ages of 60 and 65. According to the American Association for Long-Term Care Insurance, 76.4% of long-term care insurance purchasers were between the ages of 50 and 69 in January 2019.
While there is no age limit for getting long-term care insurance, the cost varies with age. Young folks will pay far less than seniors. However, you must strike a balance between cost and risk.
Long-term care insurance for a 30- or 40-year-old may be less expensive, but you may have to pay premiums for 20 or 30 years before filing a claim. However, if you wait too long, your risk increases considerably. According to the American Association for Long-Term Care, adults over the age of 70 file more than 95 percent of long-term care insurance claims in January 2019. People above the age of 80 made up 7 out of every 10 claims. You might also be interested in learning more about the advantages of purchasing long-term care insurance for women.
How Much Does Long Term Care Insurance Cost?
So, what is the cost of long-term care insurance?
The American Association for Long Term Care Insurance provides a breakdown of long term care insurance premiums by age for 2021. The average annual cost of long term care insurance for a 60-year-old purchasing a policy with a $165,000 level benefit is as follows:
- Single male: $1,175
- Single female: $1,900
- Couple: $2,600 total
You should also consider how long term care insurance fits into your budget and how much long term care insurance costs per month under various circumstances. A policy with level benefits, for example, will cost a 60-year-old couple $216 per month. According to the American Association for Long Term Care Insurance, if that same couple wants a policy with benefits that grow at 5% per year, the cost of long term health care insurance would be $729 per month.
A fast online search will help you receive estimates for long term care insurance to get a more precise approximation of how much does long term care insurance cost.
Once you've determined how much long-term care insurance costs on average, you'll want to learn how much different types of care cost in your state, as well as how those prices may vary from year to year, so you can ensure you're purchasing adequate coverage. Genworth provides a cost of care survey tool that allows you to estimate expenses across the United States based on ZIP code and kind of care. Costs can also be broken out by frequency of treatment — hourly, monthly, or yearly — as well as estimates adjusted for inflation in following years.
To get a sense of how much long-term care insurance you could need, here's a look at the annual median cost of a private room in a nursing home in 2020 in a few states, from most expensive to least expensive:
- New York state: $155,125
- California: $137,240
- Oregon: $134,138
- Washington state: $131,400, assisted living facility
- Maryland: $127,750
- Florida: $117,804
- Virginia: $105,850
- Ohio: $98,550
- Arizona: $98,550
- Texas: $76,650
- Kentucky: $95,265
- Georgia: $86,082
- Kansas: $84,315
Types of Long Term Health Care Insurance
Life Insurance with Long Term Care
Long-term care insurance premiums can be prohibitively expensive, and some individuals dislike the concept of paying for coverage they may never use. A combination policy for life insurance with a long term care rider is one of the options to long term care insurance.
If you require long-term care, a hybrid long term care insurance policy will supply it; if you don't, the policy will pay out a death benefit. Individuals looking for a guaranteed reward may find this to be the finest long term care insurance option.
With this sort of long-term care insurance, you pay either a lump-sum payment or a series of hefty annual charges.
Some combination policies need you to provide your health records and take a medical exam in order to receive a combination life and long term care insurance policy.
The following are the benefits and drawbacks of hybrid long-term care insurance:
Pros:
- You will profit from your policy in any case.
- If you pay for this coverage in one lump amount, you will avoid the premium increases that are common with regular long-term care insurance policies. Furthermore, paying in a restricted number of installments may ensure that your premiums remain constant.
- Some hybrid policies provide a money-back guarantee if you decide you no longer desire the insurance.
Cons:
- Combination policies are costly. According to the American Association for Long-Term Care Insurance, a single-premium hybrid insurance costs $75,000 on average.
- If you don't want permanent life insurance or merely require life insurance, a hybrid policy will cost you more money than you need.
Federal Long Term Care Insurance Program
Among the various types of long term care insurance available, the Federal Long Term Care Insurance Program covers most federal government and United States Postal Service workers and annuitants. Active soldiers, veterans of the uniformed forces, and their qualified families may also apply.
Pros & Cons of Long Term Care Insurance
Perhaps you're thinking if it's worthwhile to purchase long-term care insurance. Let's look at some of the benefits and drawbacks of long-term care insurance to help you make your decision:
Pros of Long Term Care Insurance
- Relaxation. If you don't want to worry about who will take care of you — and how to pay for it — if you become unable to care for yourself, long term care insurance is an excellent option.
- You can purchase as much or as little as you require. You can tailor your coverage to your specific needs and budget, whether that means choosing a policy with a fixed payout or paying more for long-term care insurance with inflation protection.
- It's a wise investment if you're certain you'll need it. If your family medical history indicates that chronic illnesses run in your family, long term care insurance may be worthwhile.
- Long-term care insurance is deductible on your tax return. Long-term care insurance benefits are tax-free. That means you can claim the cost of long-term care insurance as a tax deductible.
Cons of Long Term Care Insurance
- It's difficult to pinpoint your requirements. "How much long-term care insurance do I need?" you may be wondering. That's an excellent question. Nobody has a crystal ball to predict if you'll require care and how long you'll need it.
- Uncertain pricing: Premiums are not guaranteed and might fluctuate drastically from year to year.
- It's possible you'll never need it. Some may wonder, "Why should I buy long-term care insurance if it will be a waste of money?" Although 7 out of 10 seniors will require long-term care at some time in their lives, 3 out of 10 will not.
- There is no guarantee that you will be eligible for long-term care insurance. Before awarding coverage, insurers typically need you to pass a physical, and up to one in every five applicants is denied. Even if you are eligible, your claim may be denied. Conditions that are exclusions, contradictory opinions between your doctor and your insurer, missed premium payments, and care facilities that are ineligible under your policy are all reasons for long term care insurance rejection.
- You may not receive your advantages quickly enough: Every insurance policy has an elimination period, which is the amount of time between the injury and the release of benefits, and that period may be longer than the amount of time you require care.
Who needs long term care insurance?
So, the main question is, do I need long-term care insurance?
While there is no way to forecast the future, the odds are in your favor.
Even if you are over the age of 65 and have Medicare or private health insurance, Medicare does not cover custodial care, and private insurance typically does not cover long-term care.
According to the Insurance Information Institute, you should consider getting long term care insurance unless you have so little money that you qualify for Medicaid (which pays for low-income individuals' long-term expenses) or so much money that you can pay your bills out of pocket. The majority of folks fall somewhere in the middle.