Navigating the Shifting Terrain of Long-Term Care Insurance
If you’re like most people, you probably hope to live in your home in good health without assistance as you age. However, a majority of older adults won’t be able to get by without some assistance due to chronic illness and cognitive or mobility issues.
How Expensive Is Long-Term Care?
Long-term care is costly and prices vary by state.
- Adult day health care: $18,200
- Assisted living facility: $45,000
- Home health aide: $49,192
- Skilled nursing private room: $97,455
Don’t plan on Medicare being a funding option for long-term care, since Medicare will pay only for skilled services provided by medical professionals. For Medicare to pay any costs, the beneficiary must have been hospitalized for a minimum of three days. There are other requirements as well.
Medicaid is the program that provides government assistance for long-term care. To qualify, you must meet financial requirements, which may impact both assets and income. In most states, Medicaid will cover long-term care only after you’ve spent down your assets.
Long-Term Care Insurance Coverage
Long-term care insurance generally offers coverage for in-home care and assisted living, independent living or memory care in senior living communities. Long-term care insurance may also cover community-based services such as adult day care or hospice care. Most policies include coverage for a case manager or care coordinator.
“It’s important that the policy is comprehensive and will provide benefits in the whole range of care venues,” says Nicole Gurley, owner of Gurley LTCI, a brokerage company specializing in long-term care funding solutions.
To trigger eligibility for benefits, you must be chronically ill, meaning the policyholder is unable to complete at least two activities of daily living (ADLs) without substantial assistance from another person for at least 90 days or be cognitively impaired. A limited number of policies may have a more lenient “medically necessary” trigger for benefits.
Long-Term Care Premiums Increase With Age
Long-term care insurance premiums can be paid annually, semi-annually, quarterly or monthly for lifetime benefits. A limited number of carriers allow policyholders to make 10 large premium payments or one lump-sum payment to pay off the policy in full.
Premium amounts vary, depending on the degree of coverage, policyholder’s gender and the policy’s “elimination period,” the number of days before benefits kick in. Married couples often receive a discount. A person’s age and current health affect the premium rates when applying for long-term care insurance.
“The sweet spot is 45 to 65,” says Gurley. “Between 40 and 50, you won’t see a big difference in premiums. Between 50 and 60, there is a difference. By the time you get to 70, it’s pricey.”
The older you are and the more health problems you have, the less likely you are to qualify for long-term care insurance. “You can age out of long-term care insurance options,” says Gurley. “Most traditional products are no longer offered after age 75. Some carriers will issue through age 79.”
To get a general idea of rates, take a look at the “2018 National Long-Term Care Insurance Price Index” issued by the American Association of Long-Term Care Insurance.
Long-Term Care Insurance “Hybrids” Edging Out Stand-Alone Policies
Many people think they can’t afford long-term care insurance or worry that they’ll pay a substantial amount for benefits they’ll never use. As a result, “hybrid” policies have grown in popularity.
One type of hybrid, also known as a “life-linked” policy, has long-term care benefits packaged in. One of the advantages of a hybrid policy is that the insurance company will lock in your premium, says Sam Price, an independent life insurance broker and owner of Assurance Financial Solutions. “The cost is baked into the premium and because life insurance premiums can be guaranteed, the rate is never going to go up as long as you pay the premium,” says Price.
“The policies can be designed with benefits that a person can use in the event that the long-term care insurance was never needed. With a hybrid, even if you never need long-term coverage, you still have other living benefits such as money for cancer, heart attack and stroke, along with the life insurance death benefit.”
If someone has a life insurance policy that doesn’t include long-term care insurance, it might make sense in some cases to change that policy to a hybrid with long-term care riders or take out the cash and roll it over into a new policy with a long-term care benefit built in, Price says.
Seek Qualified Assistance With Long-Term Care Decisions
While hybrid alternatives to stand-alone long-term care insurance offer consumers more choices, the variety of long-term care funding options makes the selection process even more complex.
For example, some long-term care policies offer a return-of-premium contract provision that will refund premiums less any benefits paid to beneficiaries if the policyholder dies prior to a certain age. Life insurance products may offer a lifetime guarantee return of premium under specific circumstances.
Some traditional policies offer an optional survivorship rider. That means that if the policy is in place for 10 years without a claim when the first spouse dies, the surviving spouse has a paid-up policy. “Benefits continue to grow but the survivor doesn’t pay additional premiums,” says Gurley.
Consumers should work with an insurance broker who has extensive experience in long-term care expense planning, says Gurley.
What to look for in brokers who sell long-term care insurance:
- A broker or company with a process in place to stay in touch with clients
- A broker who has experience helping clients file claims
- A broker who has sold a lot of policies and works with multiple carriers
- Someone who specializes in long-term care policies
“We speak the language. Clients don’t,” says Gurley. “We think it is important to help clients through the claims process when care is needed.”
What questions do you have about long-term care? We’d like to hear your thoughts about long-term care insurance in the comments below.
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