Long-term care applies to people of any age who require help performing the activities of daily living (ADLs), such as bathing, dressing or eating. They may need care because of age, illness, injury, or cognitive disorder. Care may be provided by private homes, assisted-living facilities, adult day-care centers, hospices, or nursing homes.
Why Long-Term Care Insurance?
Data shows average nursing home costs may range from $6,200 to almost $7,000 per month.
Care in an assisted living facility can cost over $3,200 per month, and adult day-care healthcare services may cost more than $2,000 on a monthly basis (LongTermCare.Gov).
Traditional health insurance generally doesn’t cover long-term services. Medicare, HMOs, and Medigap don’t provide coverage for the majority of long-term care needs. Medicaid does cover some long-term care needs. However, it comes with strict eligibility requirements. Long-term care insurance is a vehicle which provides an alternative for paying for long-term services and care needs.
How Does Long-Term Care Insurance (LTCI) Work?
A LTCI policy gives a specific, per-day dollar amount for the type of care which is outlined in the policy. You pay a premium. When the benefits are activated, your policy pays this defined, per-day dollar amount. Most LTCI policies specify that certain physical or mental deficiencies are what trigger benefits.
A widely-used method for determining benefit pay-ability is based on a person’s inability to execute certain activities of daily living (ADLs). Benefits are payable when you’re incapable of performing a certain number of ADLs. Some policies will start paying benefits only if your doctor certifies long-term care will be a necessity. Others will offer benefits for cognitive or mental incapacity, contingent upon one’s inability to pass various tests.
How to Compare Different LTCI Policies?
It’s advisable to follow these steps when comparing different policy options:
- Careful review of each policy’s Outline of Coverage section
- Be sure you understand well each policy’s provisions, benefits, and exclusions
- Checking company ratings for the insurance company or companies behind the policy options you like
- Confirm company ratings with services such as Moody’s or Standard & Poor’s
How Much Does LTCI Cost?
Long-term care insurance policy costs depend on a number of factors:
- Your age at time of policy purchase
- The size of the benefit (maximum daily amount it will pay)
- The length of benefit duration (maximum number of years the policy will cover)
- The care options outlined
- Any optional riders (for instance, inflation-adjusting benefits)
As for premium cost, the younger you are, the lower your premiums will be.
Important LTCI Features
When comparing LTCI policies, you may wish to consult a financial professional or attorney for more information. Here are the features which you should carefully review and consider:
- Elimination or waiting period: How long before the insurance policy will begin paying benefits?
- Duration of benefits: What limits are placed on the benefits you can receive? This will be either a dollar amount or a time limit.
- Daily benefit: How much can you select for your daily benefit?
- Optional inflation rider: Does the policy offer protection against inflation?
- Range of care: What coverage is offered for different levels of care in different settings, such as home care or a nursing home?
- Pre-existing conditions: How long will it be before coverage goes into effect for treatment of pre-existing conditions?
- Other exclusions: Are certain conditions such as Alzheimer’s or Parkinson’s disease covered?
- Premium increases: Will premiums increase during the policy period?
- Guaranteed renew ability: Will you have the opportunity to renew the policy and maintain coverage despite any changes to your health?
- Grace period for late payment: How long will the policy remain in effect if you are late paying the premium?
- Return of premium: Will the premium be returned to you if you cancel your policy after paying for a number of years?
- Prior hospitalization: Is a hospital stay required before you can qualify for LTCI benefits?
What to Consider Before Purchasing Long-Term Care Insurance?
There’s no one-size-fits-all solution. Long-term care insurance is a better option for some people than for others. Ask these questions:
- Are you between the ages of 40 and 84?
- Do you have significant assets that you would like to protect?
- Can you afford to pay the premiums, now and in the future?
- Are you insurable, good health?
Need help determining how you will pay for long-term care expenses and other areas of spending in retirement? Personal guidance from a financial professional can help you. Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.
