by Leslie Farin
Few topics seem to cause older adults more angst than long-term care. Even thinking about needing assistance to complete activities of daily living (ADLs) like eating and bathing, and how to pay for it, is depressing. It’s no wonder so many of us avoid the whole subject of long-term care.
As per the U.S. Department of Health and Human Services, nearly 70% of people over age 65 will eventually need long-term-care services or support in their lifetime. Yet, only 3% to 4% of Americans 50 and older currently pay for a long-term care policy, according to LIMRA, an insurance marketing and research association. Women typically need care for an average of 3.7 years, while men require it for 2.2 years.
What is Traditional Long-Term Care Insurance?
Long-term care (LTC) insurance differs from your regular health insurance in that it focuses on custodial care you may need if you become chronically ill or disabled. This includes help with bathing, dressing, eating, toileting, transferring (moving around), and continence management. LTC insurance can cover care received at home, in an assisted living facility, or in a nursing home. In contrast, health insurance doesn’t cover long-term care; it concentrates on your medical treatment. This typically covers doctor visits, hospital stays, surgeries, prescription drugs, and other medically necessary services to diagnose and treat illness or injury. The goal of health insurance is to get you back to good health, while the purpose of LTC insurance is to help you live independently despite limitations.
LTC Insurance is a Lifetime Commitment
Marilyn Duckworth, owner, Health Insure Plus, stresses that we all need a plan to help cover future costs for a long-term illness or disability to protect our assets. Let’s face it, retirement savings are hard-earned, and with rising healthcare costs, future health issues can quickly deplete your nest egg. Traditional long-term care (LTC) insurance can be a lifesaver. The key is knowing upfront that it is a lifetime commitment. Once you start, you do not want to stop.
“Do not start with a long-term care policy if you cannot commit to continuing until it’s time to receive benefits. If you start paying on a policy but decide to stop before receiving benefits, you are just wasting your money. It’s important to only buy what you think you can stay with.”
You don’t need to purchase the most expensive policy. You will have other sources of income such as social security that you can use to help pay LTC costs.
Marilyn continued,
Once you start receiving LTC payments, your premium goes away. But know that if you pay on the policy for twenty-five years, you can recover your money in just one year once you start receiving benefits.”
Understanding the Key Features of LTC Insurance
Here’s a breakdown of important features of long-term care insurance:
Daily Benefit Amount
The benefit amount is the daily dollar amount your policy pays towards your care, at home or in a facility. The higher the benefit, the more coverage you have, but also the higher the premium.
Elimination Period
The Elimination period is the waiting period after a qualifying event before your policy starts paying benefits. An example of a qualifying event would be needing assistance with daily living activities. Your premium is less with a longer elimination period; however, it’s important to understand you’ll need to cover costs yourself for a longer stretch before your benefits kick in.
Benefit Period
The benefit period is the total length of time your policy pays benefits, typically measured in years. There longer the coverage, generally, the higher the cost.
Inflation Protection (Optional)
Long-term care costs tend to rise with inflation. This optional feature increases your daily benefit amount over time to help maintain purchasing power. It adds to your premium but protects your coverage from inflation erosion. So, for example, imagine you buy long-term care insurance today that will pay you $100 a day for care. That might seem like a good amount now, but what about ten or twenty years down the road? Prices generally go up over time due to inflation. With the optional inflation protection, your long-term care benefit automatically increases each year by a certain percentage (like 3%). You can think of it like an automatic raise for your daily benefit to help ensure your coverage keeps pace with rising care costs. This way, you won’t end up needing more money for the same level of care in the future. While you’ll pay a bit more for the premium with this feature, it can be a wise investment to protect your coverage in the long run.
Why Doesn’t Everyone Buy Traditional Long-Term Care Insurance?
So, if the risk of needing LTC insurance is high, why doesn’t everyone buy it? Great question. Here’s the thing: long-term care insurance can be a gamble. How do you know if you will need it? Is it worth the expense?
There are a variety of reasons people hesitate to buy traditional long-term care insurance. For starters, you may wholeheartedly believe you won’t need long-term care. Maybe you are healthy and assume that will always be the case. Unfortunately, things happen, and life can change on a dime. Or, perhaps you are someone who plans to self-insure, relying on savings to cover future costs. If that’s the case, make sure you understand the risks and the costs of long-term care; don’t underestimate how much you need to save to cover the bills. You may not be aware that long-term care facilities can easily cost tens of thousands of dollars per year. Additionally, there’s some confusion around what Medicare and other health insurance covers. Traditional long-term care specifically addresses custodial care, the daily assistance with living activities, while Medicare generally covers only short nursing home stays or limited amounts of home health in specific instances, such as for rehab after a hospital stay. And then, of course, there’s the cost. Premiums can be high, especially if you wait until you’re older to purchase a policy. This expense can stress your budget, particularly if it competes with other priorities.
If you need long-term custodial care that includes supervision and help with day-to-day tasks, and you don’t have insurance to it, in most states you’ll have to pay for it yourself. You might be able to get help through Medicaid, the federal and state health insurance program. for those with low incomes, but only after you’ve exhausted most of your savings.
Alzheimer’s Disease and Long-Term Care
Marilyn explained that Alzheimer’s Disease is the biggest driver of LTC these days. And according to the Alzheimer’s Association, about 5.4 million Americans currently live with the disease; that’s about one in eight older Americans. Slightly over one in four nursing home claims paid for by long-term care insurance are the result of Alzheimer’s disease.
You don’t want to wait until there is a diagnosis before purchasing a policy. Once diagnosed with Alzheimer’s Disease, you cannot apply for new long-term care insurance coverage. The plan must be in place at the time of the diagnosis.
The Role of an Insurance Broker in Choosing Traditional LTC Insurance
In the world of long-term care (LTC) insurance, an insurance broker can be your knight in shining armor, navigating the complexities and helping you find the best fit for your situation. As per Marilyn, it’s essential to find a knowledgeable and certified long-term care insurance broker you trust to help you through the process. Your insurance professional plays a critical role by acting as an intermediary between you and the insurance carriers.
I asked Marilyn to describe how she views the role in helping clients with long-term care policies. She explained that her primary value as a broker lies in providing expertise in the following ways:
Needs Assessment
The first step is to conduct a thorough analysis of individual circumstances. This includes evaluating your health history, financial situation, and long-term care goals. By understanding these factors, she can recommend LTC policies with appropriate benefit levels that align with your future needs.
Policy Comparison & Selection
The LTC insurance landscape is complex, with numerous providers offering a variety of plans. As a broker, Marilyn acts as an objective guide, comparing quotes from different carriers and meticulously dissecting each policy. She clarifies complex terminology and highlights key coverage details and any potential exclusions. Her goal is to empower you to make informed decisions.
Risk Management & Optimization
Considering factors such as benefit levels, premiums, and available riders, Marilyn will guide you through the various options available. She helps you weigh the potential trade-offs associated with each plan. Her expertise ensures you select the one that optimizes your coverage while staying within your budgetary constraints.
Claims Assistance
Marilyn’s role doesn’t end with policy selection. She provides invaluable support when you need to file a claim. For example, she can assist with the sometimes confusing claims process, making sure you submit the necessary paperwork correctly. She also advocates on your behalf with the insurance company. This assistance can significantly reduce stress and enable you to receive the benefits you are entitled to.
Remember that each insurance policy may have specific terms, coverage limits, and exclusions. It’s crucial to consult with an insurance specialist to explore your options and make informed decisions based on your individual circumstances. As per Marilyn,
“Your Long-Term Care Insurance advisor leverages their expertise to save you time and frustration by navigating the complexities of the market, offering unbiased guidance, and helping you secure the most suitable coverage at a competitive price.”
Pros and Cons of Traditional Long-Term Care Insurance
Are you ready to start thinking more seriously about purchasing long-term care insurance? What are the pros and cons? Does it make sense for you? Below are the pros and cons I considered before ultimately deciding to purchase my policy.
Pros
- Financial Protection: In the event I need extended care in a nursing home, assisted living community, or at home in the future, I appreciate that LTC policies help cover the costs.
- Asset Protection: A LTC policy helps me to avoid depleting my retirement savings to qualify for Medicaid.
- Choice of care: Right now, I believe I want to age in place and receive long-term care in my home. If it turns out I need to go to a community, I want to have the option to choose one where I will both receive good care and am comfortable with my surroundings. My LTC policy helps with the finances so I have options.
- Peace of mind: I want to protect my family from the financial burden of my care needs as best I can, and purchasing a LTC plan will help me to do that.
Cons
- Upfront cost: Premiums can be a significant financial burden. The younger you are when you buy your plan, the lower your premiums will be. However, keep in mind you pay premiums longer if you buy in your fifties than if you wait until your sixties.
- Health qualification: Pre-existing conditions can prevent you from qualifying. You must have your plan in place before receiving a diagnosis.
- Risk of unused premiums: If it turns out you are lucky enough not to need long-term care at any time, you may feel your premiums were a waste of money. However, none of us has a crystal ball – that’s a risk that for me was worth taking.
- Potential for rate increases: Premiums can increase over time. You need to know that before purchasing a plan, so you are not taken by surprise.
What is Hybrid Long-Term Care Insurance?
I asked Marilyn about hybrid long-term care insurance as an alternative to traditional long-term care plans. She explained that the focus of a traditional plan is solely on long-term care expenses. The plan pays out a daily benefit to cover your care. The premiums typically are lower than hybrid policies and may offer tax advantages. However, you need to understand that with traditional LTC policies, there is a “use it or lose it” scenario; your premiums, which can increase over time depending on the policy, are not refunded if you don’t end up needing long-term care.
In contrast, hybrid policies combine long-term care benefits with life insurance or another type of insurance (i.e. an annuity) into a single policy. if you don’t end up needing long-term care, the plan offers a death benefit for your beneficiaries. The premiums are usually fixed and guaranteed not to increase, and the plan may offer some cash value accumulation depending on the type of policy. Please note, however, that premiums for these plans are higher than traditional policies and the long-term care benefits may be lower and less flexible. In addition, tax advantages may be less favorable.
Marilyn prioritizes affordability and straightforward coverage for long-term needs, which is why she recommends going the traditional route. However, every situation is different. A hybrid policy may work for you if you desire a death benefit for your beneficiaries and guaranteed premiums and are willing to pay more for those features even if it means lower long-term care benefits. It’s an individual choice and requires careful consideration based on your specific needs and priorities. Again, work with a knowledgeable professional to help you decide.
So, Is Long-Term Care Insurance Worth It?
Ready to start planning for the future? It’s important to have a plan in place to ensure financial security and safeguard your retirement savings and assets. Unexpected care costs can drain your bank account quickly and leave your family scrambling for funds. Do yourself a favor and work with a knowledgeable insurance professional to make sure you receive a recommendation for the best option for your unique situation. There is no charge for this service.
Schedule a FREE consultation to discuss traditional LTC insurance with Marilyn Duckworth today! Website | Email | Phone: (972) 733-0870!
About Marilyn Duckworth
Marilyn bases her business on the conviction that her number one priority is meeting customers’ needs. Through superior customer service and being mindful of budgetary constraints, she can deliver no-hassle quotes for the best insurance options available. Thanks to her 23 years in the insurance industry, clients can be assured of a stress-free shopping experience for coverage.
Marilyn is a member of the Texas Association of Health Underwriters and the National Association of Health Underwriters. She has also received the Small Group Specialist designation and AHIP certification. Just a few of the companies she currently quotes from include: Aetna, Blue Cross, Cigna, Humana, UnitedHealthcare, UnitedHealthOne
Marilyn looks forward to earning your business and delivering the insurance industry’s best customer service in Texas. Contact Marilyn today!
17290 Preston Rd Suite 210A
Dallas, TX 75252
FAQs
Below are commonly asked questions about long term care insurance we hear from our readers.
Who typically buys long-term care insurance?
Generally, middle aged or older adults who want to protect their assets and ensure they can afford quality care later in life purchase long-term care insurance.
What factors influence the cost of long-term care insurance?
The cost varies depending on factors such as your age when you purchase the policy, the amount of coverage you choose, the length of the benefit period, the elimination period (waiting period before benefits begin), your health status, and any optional riders you select.
When should I buy coverage?
We recommend you purchase LTC insurance when you’re in good health and relatively young (mid-fifties), as premiums tend to be lower. Waiting until you’re older can result in higher premiums or even denial of coverage.
What is the benefit period with LTC Insurance?
The benefit period refers to the length of time that the policy will pay for covered long-term care expenses. Common benefit periods range from two to five years or more, and some policies offer lifetime coverage.
What is the elimination period in long-term care insurance?
The elimination period, also known as the waiting period, is the length of time you must pay for your own long-term care expenses before the insurance benefits kick in. It’s similar to a deductible. Elimination periods typically range from 30 to 90 days.