Long Term Care Insurance
IT'S NEVER TO EARLY TO PREPARE FOR
Chances are many people will need long term care insurance at some point. Statistics say the majority of us will.
Long term care (LTC) is any personal assistance you need to maintain your quality of life as you get older. Some people think that long term care only covers nursing home expenses. In fact, half of all long-term care services are provided in the home.
A common misconception
Many people think that certain programs will help cover the cost of long-term care. But the reality is:
- Health insurance doesn’t cover long-term care expenses
- Medicare will cover some long-term care costs, but only up to 100 days (after a three-consecutive-day stay in a hospital under treatment)
- Medicaid will cover long term care expenses for individuals with assets of $2,000 or less (countable assets according to Medicaid regulations; varies by state) and covered care could be limited to a nursing home
- Paying for care out of pocket isn’t practical or cost-efficient for many people
Solutions that can help
Long term care coverage was developed to help offset the cost of these services. At Nationwide we offer long-term care insurance coverage as part of a life insurance policy, either as a rider or a linked benefit. Our solutions offer protection against long-term care costs and the ability to leave a legacy if these benefits are not needed.
An In-Depth look at Long Term Care Insurance
With costs continuing to rise in long-term care facilities it is important to plan ahead for this possibility. One of the best ways to prepare for a stay in a facility is to look at purchasing a long-term care insurance policy.
According to the government site, longtermcare.gov:
In 2000, almost 10 million people needed some form of long-term care in the United States. Of this population, 3.6 million (37%) were under age 65 and 6 million (63%) were over age 65 (Roger & Komisar, 2003). Almost 70% of people turning age 65 will need long-term care at some point in their lives.
Those are fairly staggering statistics, especially the percentage of people that were under 65. The sobering part is the 70% of those turning age 65 will need long-term care at some point. That can be devastating to a families finances if they aren't prepared. Long-term care insurance policies can help prepare for this need.
Table of Contents
What Is Long Term Care
Long-term care centers provide a range of services to meet your personal care needs. Many people associate assisted living facilities with long-term care and it is a correct association. The majority of long-term care facilities are not medical centers, but rather a place to assist with your daily living tasks.
Common tasks associated with daily living are:
- Preparing and eating meals
- Going to the bathroom
- Getting dressed
- Moving from a bed to a chair
Long-term care is typically not a place to go for a cure. These centers are designed to provide as much comfort as possible while dealing with chronic illness, disability or old age. Many centers have special accommodations for those suffering from Alzheimer's disease and other mental issues.
What are the Costs of Long-Term Care
Costs for long-term care vary depending on your location and the level of services needed. According to a Compensation and Benefits review by Harvard University, 72% of Americans become impoverished after just one year of long-term care. Typical health insurance policies don't cover long-term care and Medicare's coverage is limited at best. To get Medicaid to help with any type of assisted living, you must prove you have used all of your assets first. Long-term care insurance policies are the best way to fund the extended care you may need.
The Genworth Long Term Care Cost Survey is one of the most comprehensive surveys of the industry. According to the 2016 survey, monthly costs for long term care are:
The challenging thing about these numbers is that costs continue to rise at a rate between 5 and 8%. Planning for this type of care requires a sound investment strategy accentuated with a long term care insurance policy. Sadly, fewer than 10% of the population has long term care insurance.
What is a Long Term Care Insurance Policy
Long term care insurance is one of the best ways to prepare for the need long term care. Long term care insurance is an insurance product that pays for the costs associated with assisted living. It covers care that is not covered by standard health insurance or Medicare.
As people are living longer, the need for long term care continues to grow. As stated earlier, 70% of Americans over 65 will require long term care at some point in their lives.
A long term care insurance policy does several things for you.
- Preserves your assets and income for those taking care of you or left behind.
- Protects the emotional and physical well-being of your family caregivers.
- Provides flexible options for you to choose the type of care you want.
- Provides coverage for your temporary and long term care needs.
- Gives you control over your care and legacy.
The best way to purchase a long term care policy is as a rider on a life insurance policy.
Why Buy Long Term Care Insurance
For people that don't have a long term care insurance policy, their care options become limited dependent upon their financial resources. Since regular health insurance doesn't pay for long term care and Medicare only covers short-term needs, unless you have available resources, your care options are limited to family or facilities that accept Medicaid. As mentioned earlier, Medicaid will only help after you have exhausted all of your savings.
One of the main reasons to purchase long term care insurance is to protect your savings. With costs for full-time care approaching $80,000 a year for a private nursing home room, typical retirement savings can deplete quickly.
Another reason to purchase a policy is to give you control over your care options. If you have to rely on Medicaid your choices for care facilities will be limited to those that accept government programs. Also, in many states, Medicaid won't pay for assisted living.
Many long term care policies give you control over how you spend your money. Each policy is different with some allowing you to draw down the funds before paying out of pocket expenses. Other policies require you to pay for the service first then get reimbursed. A careful examination of policy benefits and procedures is necessary to make sure you get the coverage you need.
Long Term Care Policy Terms
When shopping insurance carriers for a long term care policy there are a few things to keep in mind which can affect the price of your policy.
Age. Age is a great factor in determining the type and amount of policy you can purchase. Many companies won't sell a long term policy to those over 75. As with most insurance policies, the younger you are the less expensive the policy will be. An important thing to remember is if you purchase a policy in your 40's and let it lapse then try to repurchase another when you are older, you will pay a higher premium.
Health. Insurance companies take into account your medical history when applying for a policy. Similar to life insurance, the better your medical condition when you apply, the better terms you will receive. If you have any major health concerns like Diabetes, you many not be able to qualify for a policy.
Monthly Benefit Amount. This is the amount you anticipate for your monthly long term care costs. For example, if your state's average monthly cost for care is $4,000, you will want to purchase a policy with a minimum monthly benefit that will cover that amount.
Benefit Period. Usually stated in years, this represents the length of time you anticipate needing coverage. The 2008 American Senior Housing Association report states the average length of stay in 2008 was: Assisted Living (21 months), Independent Living (38 months), CCRC (77 months) and Alzheimer’s Care (17 months). Also, the CDC Nursing Home Care FastStats from 2014 shows the average nursing home stay to be 835 days.
When shopping for a long term care policy you need to keep those statistics in mind. The majority of policies sold cover between three to five years and have daily benefit amount between $100 and $200. Given those figures, you should look for a policy that has a minimum of $110,000 (3 years or 1,095 days at $100 per day).
Elimination Period. This is similar to a deductible amount but is stated as a number of days, usually anywhere between 30 to 180 days. The insured person must pay for her care for this number of days before any benefits are paid for.
Things to Consider Before Buying
As with any insurance policy, there are things that impact whether or not you qualify for the policy and what price you will pay. Things like family history, gender, health status and lifestyle all contribute to a policy decision.
Age: Many companies won't offer long term care policies to those over 75. If you are over 75, a simple call to your agent will let you know if you are eligible or not. Remember, the older you are, the higher your premiums will be.
Family History: If you family has a history of living long lives or a medical condition that runs in the family, you may be denied in your application.
Health Status: If your family has a history of chronic or debilitating health conditions you are considered a greater risk than those without those issues. Living a healthy lifestyle without any major family history of illness can qualify you for great rates on your policy.
Gender: Women are more likely to need long–term care because they have longer life expectancies and often outlive their husbands. While not a consideration for declining an application, it may affect the amount of premium you are offered.
Long Term Care Shopping Tips
When you are ready to shop for your policy, here are four things worth paying attention to help you get the policy that suits your needs.
First, determine your risk tolerance. Taking a look at your family longevity and medical history will help you determine what level of long term care you are likely to need. If you have a history of long, healthy lives with minimal sickness then you may not need a large policy. Conversely, if you have a history of illness you may need to consider purchasing a larger policy.
To find out the cost of long term care facilities in your area, go to Genworth's Cost of Care Calculator.
Next, evaluate your resources. Look at this like the deductible on your car insurance. What kind of assets will you have that you can apply to cover your healthcare costs before needing the insurance to kick in? This is called the elimination period. This is the number of days between the time you need benefits and the time the insurer needs to start paying. The longer your elimination period, the lower your premiums will be.
Third, determine a starting point. Looking at your current financial situation and evaluating what will fit in your budget is key to picking the right policy. You don't want to have a policy go out of force because of non-payment. That could result in higher premiums and not being able to get the same type of policy. Remember, your premiums are lower the younger you are when purchasing your long term care policy. Buying sooner rather than later is advisable. Also, buying with you are still in good health will help you get a better rate. According to the long-term-care association, 25% of applicants between 60 and 69 are rejected while 44% of those between 70 and 79 are denied coverage.
Fourth, pick a budget. Premiums have risen in recent years because people have to keep their policies in force. These factors have caused the insurance companies to have to increase their premium prices to cover their losses. When shopping for a long term care policy, you may consider pairing it with a life insurance policy to get a better rate and lock in your premiums. There are several options to look at when purchasing your policy, so giving your agent a range to work within will help you find a payment you will be comfortable with.
If you are ready to talk to an agent to see what your options are, please give us a call at (208) 232-3283 or fill out the request a quote form below:
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Find out how Nationwide's CareMatters policy can help you prepare for your long-term care needs.