By 2040, more than 20% of the U.S. population—about 80 million people—will be over 65. Many of these older Americans will develop health issues and chronic diseases that require long-term care beyond what any health insurance plan offers.
The reality is, a person turning 65 has a 70% chance of needing long-term care. One in five adults will require long-term care for more than five years.
Many assume that Medicare and private insurance plans will cover health costs, but that’s not usually the case. Also, your family may not be able to offer you the care you need.
Long-term care insurance (LTCI) tackles this problem completely. With LTCI, you know you have the coverage you need, no matter what happens with your health. Here’s a complete guide on what long-term care insurance is, how it works, and why you should consider it.
What Is Long-Term Care Insurance?
Long-term care insurance provides additional coverage beyond what regular health insurance plans provide, including HMO policies or Medicare. It enables older adults living on a fixed retirement income to afford assisted living, in-home care, health-related home modifications, and nursing home costs.
With this type of insurance, you also have more flexibility over the care you receive if you ever need long-term care. And, you reduce your financial risk–instead of paying the high cost of your preferred provider, you can use your long-term care benefits to access the care you need and stay in good health.
Long-term health care includes movement assistance, monitoring at home, personal hygiene, special medical diets, and more. These are all the tasks you might need help with if you can no longer do these things for yourself.
Without a long-term care insurance policy, these services could become quite expensive, racking up excessive amounts in the long run. As an example, long-term care for people with dementia could add up to $367,000, while those without dementia can expect to pay up to $233,000.
Medicare covers in-hospital and outpatient services, durable medical equipment, prescription drugs, and some form of adult day-care. But it doesn’t provide the type of long-term care coverage that most seniors would need.
Long-term care insurance provides a safety net for the elderly, making it easy to continue everyday living without paying out-of-pocket for all your necessary medical expenses.
How Much Does Long-Term Care Insurance Cost?
The cost of long-term care insurance varies depending on a few factors. But the primary factor is a person’s health. If you already have poor health, insurance companies will charge higher premiums.
Other factors influencing the cost of long-term care insurance include:
- Benefit duration
- Benefit amount paid per day
- Type of care covered
- Amount of inflation protection benefit
- Waiting period before benefits begin
- Cost of long-term care in your state
On average, you can expect to pay over a thousand dollars a year for long-term health insurance.
According to the American Association for Long Term Care Insurance, the average annual cost for a policy with daily benefits of $150 will cost a 55-year-old male $1,700 per year. For a 55-year-old female, it will be $2,675. The discrepancy is due to female applicants requiring more extended health care than male applicants.
If you’re married, you can save money with a policy that covers you and your spouse. A 55-year-old couple can expect to pay $3,050 per year for long-term care insurance.
With these prices, the applicants get an initial pool of $164,000 in benefits. These compound annually at 3% and become $386,500 at age 85.
These premiums might seem high, but they pale in comparison to the cost of long-term care if you were to pay it yourself.
- The median cost of care in a semi-private nursing home can be around $93,072 per year.
- A private room in a nursing home can cost up to $105,850 annually.
- The average cost for home health aides is $54,912 per year.
With long-term care insurance, you protect yourself from the burden of paying for this type of care yourself.
An alternative to long-term care insurance is a hybrid life insurance policy. Some life insurance policies allow you to include long-term care benefits in your plan, so you can have both types of coverage in one package and pay a single premium.
The advantage of this option is that you will have the death benefit included within your life insurance and long-term care plan.
5 Benefits of Long-Term Care Insurance
The main benefit of long-term care insurance is peace of mind. You won’t have to worry about losing your retirement savings or potentially becoming a burden to your family. You can have all of this for a small monthly premium.
Also, there’s potential for huge cost savings. You save money on medical expenses, don’t have to pay for the services yourself, and your regular health insurance premiums don’t increase to unbearable amounts. But there are other LTCI benefits. Let’s look at five of them.
Benefit #1: Increased Availability of Care
Medicare, and Medicaid, if you qualify for it, might cover some expenses. But Medicare won’t provide coverage for nursing home services after 100 days, and Medicaid only works if you stay in a Medicaid-approved facility.
With long-term care insurance, you choose where you receive your care and the type of care you want. You have the freedom to stay in your home or move into an assisted living facility or nursing home.
Benefit #2: Improved Range of Services for Care
You have a variety of services to choose from when you sign up for your LTC plan. Whether you want in-home care, visiting nurses, home-delivered meals, home health aids, chore services, or more, you know these services will be available to you if you require help with everyday tasks.
Benefit #3: Relieving Family and Friends From Long-Term Care
When you spend on long-term care coverage, you also send a message to your friends and family that they are not responsible for taking care of you in your senior years. They can be there to enjoy your company without the obligation of acting as your care provider.
Benefit #4: Financial Security for Spouses And Children
Since long-term care is so expensive, it can eat away at family savings. It can also require liquidation of assets and place financial hardships on your family members. With good LTC coverage, you provide the necessary financial security to your loved ones and ensure that you have the medical care you need in the future. Your family members can spend quality time with you while knowing you are well-cared for.
Benefit #5: Premiums Are Tax-Deductible
Another excellent benefit of having a long-term care policy is that it can qualify as a tax deduction on your annual tax return. Since it’s a medical insurance and health cost, it can be added to your annual medical costs if you itemize deductions on your tax returns.
Check with insurance commissioners and tax advisers to make sure you qualify.
Terms to Know Before Choosing a Long-Term Insurance Plan
There are many choices out there for your LTC insurance, and choosing the right one can be difficult. The one thing you should consider is working with a health insurance advisor who can provide you with the suitable recommendation and all the information you need.
The truth is, the language and terms around this insurance can be confusing, so it’s best to know. Here are a few definitions to keep in mind.
- Daily/monthly benefit amount is the amount that your insurance will cover in a day or a month. It depends on what services the insurance company is covering for you and what type of nursing home, for example, you might want to stay in.
- Elimination period is the period you must wait before becoming eligible to get the benefits of LTC.
- Benefit period is the period that you will receive your benefit payments.
- Inflation protection is a feature of your insurance that helps you keep pace with the rising costs of healthcare services. Since there might be a more extended period from when you start paying for LTC and when you use it, this feature helps you keep the value of your coverage with current prices.
- Premium discounts are available for those with preferred health or couples.
- Care coordination refers to services that can help you and your family design a personalized long-term care plan.
- Activities of Daily Living (ADLs) include bathing, dressing, eating, toileting, cognitive impairment, continence, and transferring. A person can use their long-term care insurance when they need help with two or more of these daily living activities.
- Freelook provision allows you to inspect the policy for some time with the option of returning it for a full refund of premiums.
- Lifetime maximum benefit is the maximum amount covering the expenses in your policy. It’s the pool of money that you can draw against for the duration of your policy.
- Skilled care is another term for nursing care.
- Intermediate care is care that is provided frequently per a doctor’s orders. This is different from skilled care in that it’s not 24 hour-care.
- Custodial care is a type of care for people who need assistance with ADLs.
How to Choose Long-Term Care Insurance
Get Professional Insurance Help
Long-term care policies are complicated, and it’s difficult to understand how to purchase coverage and all the small print that comes with a typical policy. That’s why it’s essential for you to consult with an insurance agent who knows how to buy the insurance and can help you make the most of your retirement planning.
Shop Around and Get More Quotes
Go to different insurance companies and get quotes from them. Find out exactly what their policies pay, the benefits of long-term care, if they have a money-back guarantee and any tax advantages. By getting more quotes, you can see where the differences lie for several providers.
Compare Plans Thoroughly
There’s no rush in making such an important decision. Take your time to compare prices and benefits, such as pay benefits or any daily benefit that the plans have. Talk to the representatives of your selected insurance providers and weigh the pros and cons of each.
Once you have compared each plan thoroughly, you can make an informed decision on your long-term care.
Start Thinking About Care Options with 24 Hour Home Care
Long-term care insurance is an excellent option for those reaching their senior years. It covers nursing home insurance and provides you with the peace of mind that you will be well cared for during your most vulnerable years.
You’ll also have access to more care options and services while ensuring your loved ones don’t bear the burden of care for you.
Getting started is easy. Any insurance provider can help you set up your long-term care plan and talk to you about your monthly premiums, or you can lump it with your life insurance plan.
When deciding how to use your long-term care plan, we’re always here to help. 24 Hour Home Care provides all the services you may need, including companionship, light housekeeping, meal preparation, respite care, and more. Get in touch with us to learn how we improve people’s lives every day.