Long-Term Care Insurance 101

Did you know that neither your health insurance nor Medicare would pay for extended long-term care services in the event that you needed them in the future? If you develop a chronic illness or become disabled and can no longer care for yourself for an extended period of time, you’ll need long-term care services. Here are some answers to common questions about long-term care insurance to help you figure out if it’s right for you.

Why is long-term care insurance worth it?

Long-term care insurance steps in if you develop a health condition that requires you to receive care and supervision. This could mean home health care, nursing home care or personal or adult day care. Many people mistakenly believe that Medicare or Medicaid would cover their care expenses, but this is often not the case. Without long-term care insurance in place, you may burn through your life savings or have no choice but to rely on a family member for care. Long-term care insurance is worth it because it protects your assets, spares your family from financial and emotional stress, and puts you in control of your health decisions.

Do I need long-term care insurance?

There is no way to know for certain if you will someday require long-term care either in your home or in a specialized facility. But it’s likely when you consider that people are living longer than ever and that the U.S. Department of Health and Human Services reports that 69% of people will use long-term care services at some point.¹ Many people find long-term care insurance worth it because it offers peace of mind knowing that they won’t drain their assets or put undue pressure on family members.

What are my options for long-term care insurance?

In the past, many long-term care insurance policies were sold as standalone policies. They offered coverage only for long-term care coverage in either your home or in a specialized facility. Today, almost all long-term care insurance policies are hybrid policies that bundle long-term care coverage with life insurance coverage (or an annuity). Long-term care insurance hybrid policies offer your loved ones protection in the event you pass away, while also giving you the peace of mind knowing that your long-term care needs are covered. They truly offer the best of both worlds, plus they can save you the hassle and expense of buying two separate policies.

What kind of care does long-term care insurance cover?

Long-term care insurance typically covers both in-home care and care received at a specialized facility like an adult day care, an assisted living facility, a nursing home or a memory loss unit.

How much long-term care insurance do I need?

There are many variables that go into deciding how much long-term care insurance you need. They include your budget, you and your family’s health history, your financial situation and the cost of care where you reside. Also, because almost all long-term care insurance policies are bundled with life insurance coverage (or an annuity), you will also want to consider that coverage level as well. A licensed insurance agent can help you consider your options and make the best choice.

When should I buy long-term care insurance?

Today, most long-term care insurance policies come bundled with life insurance coverage. Because both long-term care insurance rates and life insurance rates generally increase with age, it’s best to start shopping for a hybrid life insurance and long-term care policy when you’re in your 40s or 50s. That said, you can still buy a policy if you’re in your 60s or older⁠—just know that you’ll probably pay more than someone who’s younger.

How much does long-term care cost?

While the cost of long-term care varies by facility and by where you live, it’s safe to say the cost is considerable. Long-term care costs range from $19,500 per year for adult day care to $102,200 per year for a private room in a nursing home.² This kind of expense can quickly deplete your nest egg, which is why long-term care insurance is such an important coverage to consider. Many people are surprised to learn that long-term care coverage costs less than they imagined. You may even be able to deduct the cost of long-term care insurance premiums from your state and federal taxes.

How much does long-term care insurance cost?

The cost of long-term care insurance depends on factors like your age, your health and the kinds of benefits you choose. Only an insurance advisor can pinpoint an exact cost for you. That said, the American Association of Long-Term Care Insurance estimates that a couple in their mid-50s purchasing new long-term care insurance coverage can expect to pay just over $3,000 for a potential combined benefit of over $770,000 in coverage should they begin needing care at age 85.³

Where can you buy long-term care insurance?

There are three main options when it comes to getting a long-term care insurance quote and buying coverage. They include working with a licensed insurance professional, buying coverage through an employer-sponsored plan and buying coverage through an association or membership group like a trade association or alumni group. There are pros and cons to each of these three options.

How should I manage my long-term care insurance policy?

Because almost all long-term care policies are now hybrid policies that also include life insurance coverage, you will want to review your policy whenever you experience a major life change like a marriage, divorce or death in the family. It’s also a good idea to review your coverage once a year with a licensed insurance agent. This is especially true if your long-term care coverage includes a compound inflation rider or a purchase option.

When does a long-term care insurance policy start to pay for care?

You first need to meet the elimination period before your long-term care insurance policy starts to pay for care. The elimination period can be thought of as a deductible measured in time instead of money. A typical elimination period for a long-term care insurance policy is 90 days. Once that is met, you typically need to experience either severe cognitive impairment or be unable to perform two activities of daily living such as dressing or feeding yourself.

How do I make a long-term care insurance claim?

Before you file a long-term care insurance claim, it’s a good idea to review your policy to make sure you met the elimination period and the conditions that qualify you for benefits. If everything checks out, you should contact the insurer and request a claim packet. It will contain paperwork that both you and your attending physician will need to fill out. Once the insurer reviews the paperwork, they will typically set up a phone interview with you (or your legal representative if you’re cognitively impaired). The insurer will then review all the information from the paperwork and the interview to determine if you qualify for long-term care benefits.

Real Life Story

Long-term care insurance relieved the financial burden after a health crisis.

Theresa Mollicone was skeptical of long-term care insurance but after her husband, Joe, suffered a massive stroke that left him paralyzed and unable to speak, she became a believer. His long-term care insurance policy started paying the maximum daily benefit and has been just enough to cover Joe’s homecare needs.

“If we didn’t have this insurance, caring for Joe would have depleted all the savings we had,” Theresa says. “Now I’m not afraid of running of out money.”

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