It's normal for humans to approach a time when we enter our golden age, and as seniors we are unable to perform certain activities independently anymore. Therefore, a time comes when you have to give long-term care some consideration. Whether that's in a facility that offers assisted living, a nursing home or some form of arrangement in your own home, it's going to cost money. For this reason, planning ahead for the financial aspect of senior care in latter years should be at the top of your priorities.
It's a fact that many older adults take great care to make end-of-life preparations, but are ill-prepared for the reality that comes with long-term care. For example, dementia is a common problem with many seniors, with some having no one to help them through such a difficult phase. The statistics make for a grim reading. This is because a large number of seniors make funeral arrangements, create a will or get a life insurance policy, but plans for living assistance during later retirement years do not receive as much attention. Few seniors make it a point of duty to at least take out a private long-term insurance plan. With this guide, seniors and those who look after them, will have a heightened awareness into what long-term care insurance is, as well as all of its benefits.
What is Long-Term Care Insurance?
Long term care insurance, commonly known as LTC insurance, has changed over the years - from its beginning as a traditional service to its comprehensive nature and policies that make for easy access to assisted living facilities. LTC insurance previously involved paying an annual premium in exchange for financial assistance, should the need arise for skilled nursing care. This care revolved around physical activities such as feeding yourself and bathing. But with the current long-term care insurance policies, and due to the emergence of numerous senior living options in addition to nursing homes, your daily benefits can be used for just about any nursing home or a similar facility, including assisted living facilities.
The traditional approach keeps changing, with insurer loses leading the way as the main reason for a change. In its place are the life insurance and annuity policies that a senior can actually draw from for long-term care. In case it turns out that you don't need such care, the benefits will go to your heirs.
A long-term care insurance policy reimburses the policyholder with an already selected daily amount that covers a host of long-term care facilities, whether that's memory loss disease, speech or rehabilitation services. In fact, it covers any service(s) used to assist seniors with activities of daily living, such as dressing, grooming and using the toilet. An LTC policy will apply equally to adult foster care homes, personal care homes, senior board and care homes and any other types of residential care facilities that provide assistance with daily living.
Who Should Consider Long-Term Care Insurance?
Many events in life are unpredictable and you can liken a need for long-term care to such events. This is because everyone is uniquely wired, so it's pretty much difficult to tell who will need it in their golden years and who won't. But, it's best that everyone, or at least every adult, considers long-term care insurance for their retirement plans as soon as they can.
Records show that on average, Americans between the ages of 60 and above buy long-term care insurance today. This number or age bracket seems okay, but ideally, 50 is the perfect point to start shopping for a policy. Further, it's normal to have more costs attached to paying for your long-term care insurance as you grow older, with premiums etching closer to the 'too expensive' category. The more time (and years) it takes you to get an LTC policy, the more the price for the policy increases. For instance, when you get to 65, premiums will be higher than when you were in your early sixties. Add a medical exam to that as you get older, and things look too pricey.
It's not uncommon in old age for a disability to occur, or a condition as serious as mental impairment to take place. Your elderly loved ones need protection should long-term care needs arise in the future. For this reason, with available income, it's best they pay for long-term care insurance. The government may also help with long-term care, but only if their income is low, especially if the kind of care he/she needs is round-the-clock monitoring.
Who Qualifies for Long Term Care Insurance?
Those who need care are eligible for long-term care insurance. But seniors who take their time or wait until they need care come to realize that it's too late to buy a policy because health is given more consideration than age. If you or an elder adult is in a poor health condition, the policy may prove too costly to purchase.
Furthermore, seniors being able to afford a costly premium doesn't automatically mean they qualify for insurance. Medical underwriting is usually part of the requirements a good number of long-term care policies make. Applicants that are not in a fairly good health are mostly uninsurable.
Many people have some kind of health challenge which could be memory-related, or for example hypertension that requires medication. Although minor cases of hypertension won't stop you from getting insured, other health issues or conditions that have been in existence make it pretty difficult for applicants to qualify for insurance.
More people are likely to get their LTC insurance applications turned down or denied irrespective of their ages if they have an existing medical condition. These conditions include:
- Using a wheelchair.
- Oxygen use.
- Use of or imminently in need of living assistance or nursing home.
- Walking aid including walking cane or crutches.
- Assistance for any Activities of Daily Living (ADLs).
- Assistance managing finances, communication or transportation.
- Assistance shopping.
Apart from these health conditions, a number of pre-existing medical issues can disqualify a person from getting a long-term care insurance policy. Some of them include:
- Liver cirrhosis
- Alzheimer’s disease
- Sickle cell anemia
- Parkinson's disease
- Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome
- Kidney failure
You or a loved one may still qualify even with a pre-existing medical condition. Long-term care insurance undergoes changes in line with health underwriting and often varies depending on the insurer you use, thus enabling you to find a provider. Once you find a provider and you qualify for LTC insurance with the policy going into effect, the insurance provider can't cancel. Neither can the insurance provider refuse to renew or terminate a long-term care policy of a policyholder citing several reasons including gender, age, deteriorating physical or mental health.
How Much Does Long Term Care Cost?
Buying long-term care insurance is worth the risk, in spite of the obvious exorbitant nature of the plan. This is more evident when it's not provided by unpaid caregivers. The numbers are huge and it's no wonder that most Americans won't be able to come up with such amounts for their long-term care.
According to Genworth Financial’s recent study, staggering costs of various senior care on average across U.S. include:
- A semi-private room in a nursing home costs $247 per day/$7,513 per month.
- Private room in a nursing home - $280 per day/$8,517 per month.
- Assisted living facilities (one-bedroom unit) - $133 per day/$4051 per month.
- Health aide - $23 an hour.
Before seeking long-term care facilities for your elderly loved one, it's important to consider the cost of long-term care. This often depends on the type and duration of care needed, living area, provider and other important aspects. Factors that can affect the cost include:
- Time of day - Some services have two to four-hour blocks of time called 'visits' which are usually more expensive in the evening time, weekdays and even on holidays.
- Services that go beyond the basic food, room or housekeeping normally attract extra charges by providers, unless it's of an all-inclusive pricing nature.
How much does Long-Term Care (LTC) Insurance Cost?
The latest recorded costs for LTC insurance are as follows:
Age 55 adults – single: average cost of $2,007 per year
Age 55 Couples: average cost of $2,466 per year combined
Age 60 Couples: average cost of $3,381 per year combined
There are varying factors to consider with regards to a long-term care insurance policy. As with other insurances, the costs fluctuate and are tailored according to each elderly adult’s case. Such factors that can affect the costs of an LTC insurance policy may include:
- The age of the applicant.
- Benefit duration.
- Benefit amount paid per day.
- Kind of care covered.
- The waiting period before benefits begin.
- Inflation protection amount.
- Health status.
- The location of the applicant and the cost that applies there.
On the whole, rates vary from one provider to the other, with premiums further showing a divide. If you want a more flexible and affordable policy, shop around and compare the prices that you come across.
What Does Long Term Care Insurance Cover?
There are different kinds of coverages for long-term insurance policyholders. It all depends on what you want and the premium amount you can afford. Also, some policies have well-rounded features including benefits that apply to different settings. However, it's best you're aware of the care facilities which yours specifically covers, because you or your loved one may not be paid the benefits if you're in the wrong type of facility.
Furthermore, there are policies that only cover some state-licensed facilities or only nursing home care while others cover assisted living facilities. These facilities are common and continually on the rise. There are policies that cover in-home care as well, whether that's physical therapy, nursing care, medical equipment and more.
Insurance policies may also cover community care accompanied by adult day care and respite care, so that you and the caregiver can take a break. Some policies offer benefits to relatives or individuals that fill the caregiving role or perform some home care duties, including adding wheelchair ramps or having safety measures observed.
If you have an elderly loved one suffering from early onset Alzheimer's, or some form of dementia, some policies offer coverage, but there are often conditions attached, which makes it all the more worthwhile to study the policy you're after. This is because there might be hidden coverage exclusions that can affect payment of benefits to you or a senior citizen.
Most policies that have existed for a while wouldn't pay benefits that don't cover long-term care for a policyholder. Certain conditions, including a hospital or skilled nursing facility stay for at least 3 days must be met. Also, with many people needing long-term care – thanks to increasing frailty, dementia, and other illnesses, they might find it difficult to get long-term care without meeting the requirements. But some states have prohibited polices from adding these exclusions, while other states haven't.
Again, you'll find that many LTC policies permanently leave out paying benefits for some conditions. Ensure you watch out for conditions like cancer, diabetes, and heart disease. Other exclusions include alcohol or drug abuse, treatment already paid for in a government facility by the government, illness, injury from war and attempted suicide or self-harm. In all, don't purchase policies that have exclusion periods longer than 6 months.
When is the Best Time to Buy an LTC Policy?
For starters, there's no specific age when you should buy a long-term care policy; neither are there restrictions for purchasing long-term care insurance. But the catch is the older you get, the more expensive the policy gets and the more difficult or often impossible it is to get approved for the policy. This is why most people, on average, buy their policies when they are still in their 50s or just into their 60s. Again, nothing stops you from purchasing a policy when you’re around 40 years (some insurance companies suggest this). But 60 is probably the best age to get one from both a pricing and ability to qualify standpoint.
Seniors who wait until they get to 70 years old would find a good long-term care policy hard to come by. They might not qualify for coverage, and existing health problems will only make things worse. Also, you'd struggle to find any insurance company that would offer coverage to anyone over 80 years of age. Even if they do, the premium is another sticking point, as an LTC policy for an 80-year-old senior citizen would be extremely expensive and difficult to afford.
The question you or a senior citizen should be ready to answer is: "what do I want my long-term care insurance to do"? This is the foundation of any policy you want to purchase. If you're looking to combat the exorbitant nature of a policy at every turn and you have assets needing protection that enable you to pay the premiums, get long-term care insurance immediately.
Life doesn't guarantee tomorrow. This is why getting a policy early enough is never a bad idea. Even if you don't purchase one at an early age, put a plan in the works towards a moment in your life when you may not be as physically capable as you'd expect. Whether that's making plans for senior housing or some nursing care, make the best of your time and resources.
The ages between 45 and 55 stand out as an early time to get an LTC insurance policy. Firstly, because it would be 'easy' to afford a policy at this age. Also, rate increment for these ages are small compared to others. Secondly, as far as good health goes, this is a great age bracket and often attracts premium discounts in line with your health history. Without worrying about illnesses, you can settle for a premium that won't hurt in the future.
It's already common knowledge that the premium costs climb rapidly when you're into your 60s. It's best to buy long-term care insurance (with low premiums) sooner, rather than later.
How to Select the Ideal Long-Term Care (LTC) Insurance Plan?
If you're looking for long-term care insurance for a loved one or a senior you care for, get in touch with their employer, former employer, insurance broker or provider and see what existing policies they have. This way, you get to examine whether more coverage can be added to an existing policy. Also, you can make sure their existing policies are the best they have by getting quotes from more sources. For that, you can check with independent agents who have links with more companies instead of a single provider. This way, your options are open.
There are different factors that contribute to finding the right LTC insurance plan. Some of them include the age of the senior, which affects costs, inflation and how much benefit accrues per plan. It's important you draw comparisons between plans so that your senior finds the best and affordable LTC policy.
If you don't feel comfortable with any coverage, get a senior/elder law attorney or financial planner to help put things into perspective. For instance, if your loved one has certain health concerns like memory loss disease, or something more severe with or without existing coverage, you'll know what to do. An expert helps you go through the process, checks the fine print, especially if it's not quite what you paid for. You'll find that some states require a 30-day cancelation period and a refund is usually issued if the LTC policy is canceled before expiration of the time limit.
Furthermore, long-term care insurance, like other types of insurance, is a financial gamble with a punt by your senior citizen, weighing years of premiums against stretched-out long-term care. Making such a gamble is a risk, but it ensures they receive a policy that has premiums they won't struggle to pay off for years at a time. This is necessary, especially if their monthly income changes and premiums rise.
To further be on the safe side, look for LTC insurance policies that offer some form of refund protection if your elderly loved one or any policyholder can't keep up with payments of increasing policy premiums. This would make the policy attractive and one you'd want your loved one to enjoy.
What Are the Daily Benefits of an LTC Insurance Policy?
In an LTC insurance policy, “daily benefit” is the amount paid out every day the policyholder needs care. Depending on the provider you have, benefits may be paid on a daily or monthly basis, with the daily amount multiplied to equal a monthly payment. When you want to help a loved one choose the right daily benefit amount in their policy, search out local nursing homes, home health, and other agencies to find out the average costs.
If you contact any facility, ensure you get quotes for long-term care rates and not short-term rehabilitation; also check the rates for private and semi-private rooms and note the differences. Most importantly, the daily benefit should cover costs for care of the facility.
Having gotten accustomed to the daily expenses involved, go ahead and decide how much of the amount your loved one can pay from their pockets. Whatever investment they have, ensure such funds are available when payments are needed. There's a misconception that you need to over-inflate the daily benefit amount to try and meet up with increasing costs of care with long-term care costs being on the rise. But that's often the job of the inflation protection benefit that is present in many LTC insurance policies, which keeps the daily benefit on par with increasing costs.
How Does Inflation Protection in LTC Insurance Plans Work?
If you're buying a long-term care insurance policy for an elderly loved one today, chances are you want it to still be useful a few years from now. That's what inflation protection does. For instance, if a policy has no inflation protection, the amount won't cover for daily costs when it's needed over the course of 15 or more years. But with the benefits of inflation protection, the amount of the policyholder's benefits increases through the years with the policy. As you look for the best LTC plan, you'll come across policies that have a time limit on inflation protection, which could range from 10 to 25 years from the date the policy was purchased.
Furthermore, some policies put a stop on inflation protection when the holder reaches a certain age (usually 80 to 85). Also known as a benefit increase rider, when you choose a policy that includes it, premiums won't be all that expensive. There are various forms of inflation protection, but never choose a policy without it. There's always one to fit your needs.
What are the Basic Types of Long Term Care Insurance?
Stand-Alone Long-Term Care Insurance Policies
Stand-alone LTC insurance policies offer the most direct and affordable solution when you pay for long-term care expenses. With more than 40 years of existence, most such policies will reimburse the actual cost of care if you:
- Need assistance with at least two of six daily living activities such as bathing, feeding, dressing, transferring, toileting and continence.
- If you become cognitively impaired because of conditions like Alzheimer's disease or memory loss disease.
Hybrid Long-Term Care Insurance Plans
Also called 'Asset-based long-term care insurance,' hybrid LTC insurance plans combine two types of coverage under one policy. You can have either life insurance or qualifying annuity along with a long-term care insurance rider.
With a permanent life insurance policy or annuity, you can have them re-purposed to add a long-term care insurance rider. Holders of hybrid policies can be safe knowing that when they die without needing long-term care, their heirs receive a death benefit.
What Are the Ways to Trigger Long-Term Care Insurance Benefits?
You can get benefits from an LTC insurance policy when you achieve certain eligibility requirements called benefit triggers, which may include:
- Needing help with Activities of Daily Living: If the policyholder can't perform a number of Activities of Daily Living, which could be two or three, they'll be eligible for long-term care insurance benefits.
- Doctor certification of medical necessity: A policyholder's doctor has to certify that long-term care is medically necessary.
- Cognitive impairment: If your loved one develops Alzheimer's disease or other dementia and require a memory care facility, it can trigger benefits. But some policies won't pay for cognitive impairment if you can still perform Activities of Daily Living on your own. Some states frown at limits placed by insurance companies on benefits if the policyholder only suffers from Alzheimer's disease.
What are the Tax Benefits of LTC Insurance?
Most people give a lot of thought to the costs involved in getting a long-term care insurance policy, but in truth, they should also consider the tax benefits.
With a tax-qualified policy, your loved one can have their premiums itemized with other medical expenses. But the maximum deductible limit for long-term care insurance premiums has age as a factor. This makes only a part of the total medical expenses of the policyholder's adjusted income usable as a deduction.
For self-employed individuals, the tax benefits really increase. Rather than itemize their premiums, they can claim the whole amount as self-employed health insurance deduction gotten from their income. In fact, they don't have to be fully self-employed to get this deduction.
Should you Buy LTC Insurance?
Long-term care insurance is very important. It helps to prevent emotional, physical and financial stress to families and helps seniors to live better lives as they get on with age. With a Long-term Care policy in place, the future of the senior and loved ones is secure. Always consult with an accountant, tax attorney, medical experts, and others before taking on any LTC policy. Search out the best, most comfortable and most beneficial long-term care options that are tailored to suit your elderly loved one’s unique situation.