Long-term care insurance
Imagining your future needs for long-term care is likely not the most thrilling idea you have ever had.
In fact, most people choose not to think about it all. While we understand your temptation to avoid the subject, we also understand your crucial need to consider the following;
While some avoid these thoughts, many realize the need to have long-term care insurance in place for these occurrences. Many of these individuals have witnessed these events first hand. For many, it comes down to witnessing their parents suffer from Alzheimer’s disease without an insurance policy. Others experienced the opposite and watched mom or dad go through Alzheimer’s with an insurance policy that helped them through the progressions of their disease. These LTC policies may have covered in-home care all the way to extensive nursing home care.
“These policies can help individuals maintain their independence for as long as possible, often times even at home” say many who have witnessed these plans in action. “They allow for the opportunity to feel a little less alone throughout this process”.
These policies can help accommodate for an easier transition.
The Costs
As according to the American Association of Long-Term Care Insurance, over 8 million American find themselves prepared and insured with long term care insurance.
These rises can be accredited to the simple cost of care/labor rising and more. Premiums are also not exempt from these increases as insurers can get approval to raise their premiums.
These increases can be traced back to numerous factors, including miscalculations on the part of insurers, causing them to underprice their policies. When this happens the companies must make up for these miscalculations and must do so in adjusting the price, often times this can result in higher premiums to make up for years of miscalculations.
Rising Premiums
In order to avoid rising premiums some may choose to self insure. For many, this looks like setting aside a pool of money to be used specifically for your future long-term care. Some will qualify for Medicaid to cover the cost of their long-term care. However, there are requirements and stipulations to be met that may not be favorable for all.
Most financial advisors continue to advise their clients to obtain some form of long-term care insurance, even with the possibility for premiums increases.
Perhaps, this is because being uninsured in the face of long-term care can completely devastate all other aspects of one’s financial portfolio.
Long term care is costly and rising. The national median cost for a private room in a nursing home back in 2018, was $100,375 alone. More median figures to look at are $48,000 a year for assisted living and $50,336 a year for a home health aide.
Sooner than later
On average, it is wise to purchase long term care insurance coverage by age 55. However, the circumstance will vary depending on your specific health profile.
Some have even obtained policies as early as age 27 however, this is not advised for all. These individuals view insurance as a need they cannot risk to go without.
When weighing possibilities such as early death, job loss, fires, injury, and likeliness for care, the need can become apparent. If you weigh the odds, it is likely either your spouse or you may require long-term care at some point or another.
Your financial needs may vary with age. Younger individuals may be busy addressing student loans, credit card debts, or obtaining a job with a retirement fund however, some experts advise for even these younger individuals to begin planning for their long-term care as soon as possible.
Factor this
The variable factor in this is maintaining your health as you age. You simply do not know what your health may look like in the next ten years. Will you suffer any major accidents, complications, or illnesses? Your ability to qualify then for long term care versus now may vary dramatically. For many, this will vary dramatically even from age 30,40, or 50.
This is why for many the best time to obtain long term care insurance is now.
Many advise “Do not wait to buy”. Many individuals will choose to purchase insurance sooner, rather than later.
One concern with waiting to obtain a policy is the future availability of insurance. Due to increasing claims and low interest rates insurers may not make the return on their money as expected, this could impact the availability of insurance for future policyholders.
Not to mention, there are an abundance of creative ways to fit long-term care insurance into your budget now.
Your options
You standard and traditional long-term policy will usually cover the costs of long term care for a certain duration of time (typically six years).
Your level of coverage or coverage amount will tend to vary upon your geographic location. Most benefits comes in monthly allowance like $3,000 a month and include inflation protection. Your monthly allowance or benefits would grow with inflation.
There are different types of LTC insurance options. For example, for those worried they may never use the funds poured into their policies, there’s hybrid long- term care insurance. These hybrid policies combine long term care benefits with life insurance. The life insurance portion can later be paid out to beneficiaries if unused.
A survey conducted in 2018 found that up to 85% of 350,000 Americans with long-term care benefits, opted for the hybrid route. This product offers the best of bost worlds however, it is also costlier.
If you are worried about affording long-term care insurance, you should know that there are plenty of ways to help mitigate the costs.
You can customize your policy to design a cost that works best for you. This means altering your benefits, inflation, and riders.
Some coverage is better than no coverage. Ensuring that at least a portion of your needs are covered can help you afford the policy you need with a little more peace of mind.
In the event that you need the coverage, some of it will be there. It is important that you always pay your premiums otherwise you will lose your benefits.
Going Uninsured
Given that your funds qualify, Medicaid may be a route for those unable to afford coverage.
With Medicaid however, you will have to make sure you have depleted assets before qualifying. Additionally, working with an attorney or financial advisor can help you protect your assets. Medicaid will conduct a five year look back which will analyze your assets and finances. You can also be penalized for any gits allotted during that five year period.
If you feel uneasy about obtaining a policy you may never use, rising premiums, or insurers, you will want to save on your own. In fact, you will need to save on your own in the case that you wish to go uninsured, and you will want to save a lot.
The cost of care will vary depending on a number of factors including, location, years of care, and level of care. The years of care will vary by individuals however, on average you can expect at least five months of care. It is also important to note that on average women tend to outlive mean and thus require longer durations of long-term care as well.
What is LTC?
You may think that your health insurance will cover all of your medical expenses including those accrued in your older years. This is not usually the case. Aging can come with many new types of care, including long-term care. Long-term care is not covered by regular health insurance.
Long- term care insurance can help cover the costs of a nursing home as well as other kinds of specialized care senior may need.
Coverage
Long-term care insurance covers the costs associated with care for chronic illnesses in old age, at home care, nursing home costs, and or memory care. LTC insurance can also help cover other costs associated with help for daily activities.
It will not cover the cost of prescriptions, routine doctor visits, or surgeries as those fall under medical care.
Different coverages
Medicare is health insurance given to all Americans who fall in the 65 or older range. Medicare differs from long term care and it will not cover long-term care costs. Medicaid is health insurance offered to lower income American who qualify. Medicaid can help cover long-term care costs however you must be below a certain income level to even qualify.
Some have considered depleting their assets when the need for long-term care arises in order to qualify for medicaid however, it is not that simple. Medicaid will conduct a five year look back period and will carefully review any assets you “gifted” or depleted the past five years.
Nursing homes costs can vary greatly. The nationwide average sits above $200 per day however, you can easily run into $400 a day depending on location. With these figures you are looking at up to $75,000 – $150,000 a year. You must also consider how long your potential stay will be and multiply by that number.
Long-term care insurance may be ideal for those who have adequate savings they wish to protect. Couples and those who are purchasing long-term care together can also benefit from discounts. Both spouses can become insured at only slightly more cost than if one were applying for an individual policy.
Opt for coverage
Long-term care costs are constantly rising. Additionally, knowing whether or not you will need care is impossible. According to AARP, 70% of individuals 65 or older will need long-term care.
If your finances are unpredictable or complicated it may be best to consult with a financial advisor. Given that your financial situation is accounted for but you have long-term care questions you should work with a trusted agent. Any step at all towards planning for your future long-term care is a step in the right direction.
Planning for you future long-term care now, can make all the difference in the years to come. You will want to be prepared for the unexpected and not have to worry as much. Long-term care insurance can also help protect your assets.
Aside from your assets, long-term care insurance can help alleviate the burden form your family and a hybrid plan can help you leave behind your assets to them. If you have been curious about how to plan for your future-long term care, it may be time to start up that conversation. Talk to your family, friends, or a trusted advisor to learn as much as you can about the subject.
Get familiar
Familiarize yourself with which programs and options may or may not be available to you.When it comes down to analyzing the costs don’t assume, but instead look at real life numbers. The costs for this type of care is constantly rising. You will want to have some sort of idea of what costs you may be facing and also have a plan in place to account for those costs. Long-term care insurance may be the best option for you whereas, medicaid may be an option for others. Some individuals may prefer a hybrid policy over traditional long-term care insurance.
Having long-term care on your radar is the first step. Some related topics to consider are:
- Retirement
- Savings
- Assets
- Types of care
- Location
- Family History
- Your health
If you or someone you love is interested in Long Term Care or Long Term Care Insurance be sure to visit: LTC TREE for more information.
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