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Long-Term Care Insurance: What It Is and How To Decide If You Need It

Long-term care is a complex topic—there’s no way around it. 

While aging comes with beautiful moments, it can also be emotional and draining for you and the people around you. If you don’t have conversations concerning health and caregiving plans early, you and your family will be left frantic and unprepared.

Long-term care is highly prevalent in the U.S. In fact, 70% of people over 65 will require long-term care at some point. It’s also expensive, and can easily cost you $100k a year, so now is the time to organize your savings vehicles, whether investments, HSA’s, and/or long-term care insurance. 

First, you need to get a clearer picture of what long-term care is.

Understanding Long-Term Care

Before you get insurance brokers involved, it’s essential to know the ins and outs of long-term care. Long-term care is a supplemental part of your healthcare plan and covers various services that aid and support a person’s health needs over a specific period.

People require long-term care when they need help with daily activities like eating or getting dressed. There are facilities like nursing homes or assisted living facilities that perform long-term care, or you can choose to have home care where a professional assists you in your own home.

A critical component in determining if someone requires long-term care is assessing the activities of daily living (ADL). ADLs are everyday tasks that the average person can do without assistance. There are six basic ADLs:

  • Eating
  • Bathing
  • Getting dressed
  • Toileting 
  • Mobility
  • Continence (bladder control)

How a person performs these actions is vital in determining their medical status and what type of long-term care they may need as they age. ADLs are so important because they significantly affect a person's day-to-day life and safety. Simple things like going to the store or cleaning your home can turn dangerous if ADLs are not taken seriously.

Long-term care is costly, and unfortunately, Medicare doesn’t cover long-term care needs. It’s essential to make a plan for this coverage gap so you and/or your family aren’t drowning in bills down the line.

How Does Long-Term Care Insurance Work?

You can purchase a long-term care insurance policy from a provider that offers different lifetime and daily maximums that fit your unique needs. Lifetime and daily maximums are just what they sound like. For example, your insurance policy may cover up to $200 per day and $400,000 total.

To qualify for long-term care insurance, you’ll need to fill out various paperwork and take part in a medical exam. These things will determine your eligibility for coverage. You’ll also need to prove you can’t do at least 2 of the 6 ADLs listed above, have a separate nurse evaluation, and a written plan from your doctor to send to the insurance company. 

It’s not uncommon for long-term care policies to have elimination periods of 30, 60, or 90 days. An elimination period, also known as the qualifying period, is the length of time between when an injury or illness begins and receiving benefit payments from an insurer. Once the elimination period ends, you’ll start receiving your plan’s benefits.

What Does a Long-term Care Policy Cost?

The cost of long-term care depends on several factors, such as your 

  • Age, 
  • Gender, 
  • Health condition, 
  • Marital status, 
  • Coverage amount, and 
  • Insurance company

Generally speaking, the older you are, the more expensive your premiums are. The same applies to health conditions. The healthier you are, the less expensive your policy will be, but your premiums will be higher if you have known health risks or worrisome family health history.

Gender may play a surprising role when it comes to premiums. Because women tend to live longer than men, women have to pay nearly double the cost for long-term care insurance. Marital status also affects your premiums. Like how married couples get a break on taxes, they also tend to have lower premiums than single people.

Premium prices are also affected by the amount of coverage you want and the length of your elimination period. Plans with more coverage and 30 day elimination periods will likely be more expensive than those with slightly less coverage and 90 day elimination periods.

When Should You Consider Buying A Policy?

Unfortunately, there’s no exact date or time for a person to buy a long-term care policy, but it’s often best to begin your due diligence in your mid-50s and early 60s. After age 65, it’s quite tricky to get a policy with a reasonable premium. The right time to purchase a policy is unique to your needs, health plan, family history, savings, and retirement assets.  

Why Consider a Long-Term Care Policy?

Neither traditional health insurance nor Medicare covers long-term care, and unfortunately, Medicaid can’t offer much assistance (without first depleting your assets). 

Medicare’s options are minimal and will only be helpful for short-term nursing home stays or limited amounts of home health care if you require it for a specific health reason. Medicare doesn’t cover help with day-to-day tasks or long-term arrangements.

Long-term care insurance is helpful for two main things: 

  • Protecting your hard-earned savings, and
  • Giving you a variety of options for care

We’ve said it before, and we’ll say it again, long-term care is very costly. The average cost of a semi-private room in a nursing home facility in 2020 was over $7,700 per month, which nets out to over $92,000 per year. So you can see how it can drain your savings quickly with no coverage.

Long-term care insurance also gives you control over the quality of care you want and deserve. While long-term care may be a hard reality to face, you want to be cared for at the highest possible level if the time comes.

Health In Retirement

Health in your golden years is essential, so start planning for it now. You don’t want to start off your time in retirement worried and unprepared for your changing health needs. Start having conversations with your spouse and family know about what you want and desire when it comes to long-term care.

Along with your spouse and family, you also need to start having conversations with your financial advisor. When it comes to affording long-term care, your advisor can help put together a plan and strategy to help you live out your most fulfilling life. Take the next step to secure your future and schedule a strategy session with our team.