Long-Term Care Insurance
Get the Coverage You Deserve
Long-term care insurance provides valuable support and financial resources to help cover the cost of long-term care you might need. Thinking about long-term care insurance now can protect your assets, and give you control over where you receive care, and how you, or your family, pays for it.
It might be hard to imagine now, but chances are you’ll need some help taking care of yourself later in life. By the time you reach 65, chances are about 50-50 that you’ll require paid long-term care services someday. If you pay out of pocket, you’ll spend $140,000 on average. Yet you probably haven’t planned for that financial risk. Only 7.2 million or so Americans have LTC insurance, which covers many of the costs of a nursing home, assisted living or in-home care.
Medicare does not cover long-term care and it remains to be the unsolved problem for so many people.
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Why buy long-term care insurance?
About half of 65-year-olds today will eventually develop a disability and require some long-term care services, according to a study revised in 2016 by the Urban Institute and the U.S. Department of Health & Human Services.
Regular health insurance doesn’t cover long-term care. And Medicare won’t come to the rescue, either. If you don’t have insurance to cover long-term care, you’ll have to pay for it yourself. You can get help through Medicaid, and the federal & state health insurance program for those with low incomes, but only after you’ve exhausted most of your savings.
People buy long-term care insurance for two reasons:
To protect savings. Long-term care costs can deplete a retirement nest egg quickly. The median cost of care in a semi-private nursing home room is $89,297 a year, according to Genworth’s 2018 Cost of Care Survey.
To give you more choices for care. The more money you can spend, the better the quality of care you can get. If you have to rely on Medicaid, your choices will be limited to the nursing homes that accept payments from the government program. Medicaid does not pay for assisted living in many states.
How does long-term care insurance work?
Under most long-term care policies, you’re eligible for benefits when you can’t do at least two out of six “activities of daily living,” called ADLs, on your own or you suffer from dementia or other cognitive impairment.
The activities of daily living are:
Bathing
Caring for incontinence
Dressing
Eating
Toileting (getting on or off the toilet)
Transferring (getting in or out of a bed or a chair)
When you need care and want to make a claim, the insurance company will review medical documents from your doctor and may send a nurse to do an evaluation.
Under most policies, you’ll have to pay for long-term care services out of pocket for a certain amount of time, such as 30, 60 or 90 days, before the insurer starts reimbursing you for any care. This is called the “elimination period” after which the policy starts paying out.
What is the cost of long-term care insurance?
The rates you pay depend on a variety of things, including:
Your age and health: The older you are and the more health problems you have, the more you’ll pay when you buy a policy.
Gender: Women generally pay more than men because they live longer and have a greater chance of making long-term care insurance claims.
Marital status: Premiums are lower for married people than single people.
Insurance company: Prices for the same amount of coverage will vary among insurance companies. That’s why it’s important to compare quotes from different carriers.
Amount of coverage: You’ll pay more for richer coverage, such as higher limits on the daily and lifetime benefits, cost-of-living adjustments to protect against inflation, shorter elimination periods, and fewer restrictions on the types of care covered.
What are the tax advantages of buying long-term care insurance?
Long-term care insurance can have some tax advantages if you itemize deductions, especially as you get older. The federal and some state tax codes let you count part or all of long-term care insurance premiums as medical expenses, which are tax deductible if they meet a certain threshold. The limits for the amount of premiums you can deduct increase with your age.
Companies that sell long-term care insurance
The number of insurance companies selling long-term care insurance has plummeted since 2000. More than 100 insurers were selling policies in the late 1990s, according to a 2016 study published by the National Association of Insurance Commissioners. Less than a dozen are selling policies today.
The uncertain cost of paying future claims as well as low interest rates since the 2008 recession led to the mass exodus from the market. Low interest rates hurt because insurers invest the premiums their customers pay and rely on the returns to make money.