5 Important Things You Should Know About Long-Term Care Insurance

Minnesota Long Term Care Insurance

We all want to live as long as possible, but longevity gets expensive. The life expectancy after age 65 is 19.4 years. As we age, we are more likely to need help. According to recent statistics, 70% of people 65 and older will need some kind of long-term care eventually. The problem is, long-term care is unpredictable. How much care will we need? How long will we need it? How much will it cost? Currently, about 7.2 million Americans have long-term care insurance. In order to plan for the future, here are five important things you should know about long-term care insurance.

1. What is long-term care insurance?

Long-term care insurance provides care for people who require ongoing care over an extended period of time. Long-term care is different from medical care. It generally provides a range of services and support for various needs. It helps people with chronic illnesses, conditions, or disabilities with their personal care, rather than improving or curing medical problems. Care may be provided in a nursing home, hospice facility, assisted living facility, day care facility, or your own home.

2. Who needs long-term care insurance?

People who have a major or chronic illness, such as a heart attack, stroke, Alzheimer’s disease, broken hip, or those who have been injured may need help with the activities of daily living. The need for such care may arise suddenly, as with an accident, or gradually. The goal of these services is to offer as much independence and safety as possible to those who can no longer take care of themselves. Everyday activities may include eating, bathing, dressing, grooming, and moving around, such as transferring from a bed to a chair.

3. The basics of long-term care insurance.

You can purchase long-term care insurance through private insurance companies, or through a group plan through an employer or an association. Some insurers offer a “shared care” option when both spouses buy policies, thereby allowing you to share the total amount of coverage. There are some tax benefits available to those who purchase certain tax-qualified insurance policies. Talk with your tax advisor to see if any tax advantages are available and beneficial to you.

It is best not to delay making this decision. If your health is already deteriorating, or you already need services, you may not qualify for long-term care insurance. In certain cases, however, it is possible to buy limited coverage or obtain coverage at a higher rate. You should consider whether you will be able to pay the policy’s premiums. You do not want to buy a policy that you are later unable to maintain.

When you decide to buy a long-term care insurance policy, you must first fill out an application and answer health questions. You will choose the amount of coverage you want, including a range of care options and benefits. Policies reimburse policyholders a daily amount up to their selected limit. Policies differ in the way that they pay. Some pay different amounts for services, such as one amount for in-home care and another for care in a nursing home. Or they may pay just one rate for any service. The term “pooled benefits” means you tailor the types of services you use to fulfill your particular needs.

Most long-term care policies provide that you are eligible to receive benefits if you can’t do at least two out of six of the activities of daily living. People who have dementia or cognitive impairments also qualify.

When you need care, the insurance company will review medical documents and do an evaluation. The insurer will also want to approve your plan of care. Most policies provide an elimination period, during which you will have to pay for your long-term care services yourself before the insurer starts making payments.

4. How expensive is long-term care insurance?

The cost of long-term care depends on how much care you need and where you receive services. Other factors influencing the rate you pay include:

  • Your age and health: It is generally best to buy a policy when you are younger and probably have fewer health problems.
  • Gender: Statistically, women live longer, and so they are more likely to make a claim on their long-term care insurance.
  • Marital status: Married people’s premiums are lower than those of unmarried people.
  • Insurance company: Prices vary among companies, even for the same amount of coverage. You should always compare quotes from different carriers, but make sure you understand the terms.
  • Amount of coverage: If you want higher limits on your benefits, shorter elimination periods, fewer restrictions or cost-of-living adjustments, your premiums will be higher.

It is a good idea to compare costs for all types of care. You may wish to check out costs for services provided by a nursing home, assisted living facility, and in-home care in your area. According to the National Association of Insurance Commissioners, it is generally best to spend no more than 5% of your income on a long-term care insurance policy.

5. Why buy long-term care insurance?

There are two main reasons to consider buying  long-term care insurance:

    1. To protect your funds. No matter where you choose to receive your care, it can drain your savings very quickly.
    2. To give you more options for your care. You will want the highest quality of care, in the best facilities that you can afford. If you have to rely on Medicaid, your options may be limited.

The long-term care insurance field is rapidly evolving. In addition to traditional long-term care policies, there are many new “hybrid” policies which you may wish to consider. Each situation is different, so you should discuss all of the possibilities with your insurance advisors.

Long-term care can mean everything from what services and supports you need to how you will pay for them. Each individual’s situation is different and involves a complex net of finances and social dynamics. Considering the options for your future care should be a key part of your long-range financial planning. For more information on long-term care insurance, contact us.