03 Jun Is Long-Term Care Insurance Right For Me?

To know for sure whether you will need long-term care in your old age, you’d need a crystal ball. The prospect of expensive long-term care prices, as well as the financial pressure they will pose on families, is enough to make many people consider purchasing long-term care policies. 

Long-term care insurance has a reputation for being ridiculously expensive due to significant cost increases. According to experts, the ever-increasing cost of long-term care premiums largely affected older policies that were built on incorrect assumptions. Customers purchasing long-term care insurance today are unlikely to face the same uncertainty. In the meantime, the insurance market has shifted and improved, with fewer insurers providing traditional long-term care insurance.

What is Long-Term Care Insurance?

Long-term care insurance covers certain risks involved with lifelong diseases, such as clinical assistance with feeding, washing, dressing, and using the toilet. Basically, it can be described as health care insurance for things you won’t be able to recover from. 

Premiums are usually paid on a monthly basis before the policyholder passes away or requires medical attention. If they use long-term health coverage, the insurance provider will pay a regular or monthly benefit amount to cover eligible programs or services. Some eligible programs and services include hiring a home health nurse, using adult daycare, or going to a nursing home.

If you live long enough, you will almost certainly need long-term care – in the form of a facility or health service – at some stage before you pass away. This includes either treatment provided in your own home or in a hospital such as a nursing home.

People in their 50s or early 60s, who are healthy and have lived a relatively safe life, are often the ones who will consider buying long-term care insurance plans. More often than not, younger policyholders are more likely to qualify, securing lower premium rates. 

Why Should I Purchase Long-Term Care Insurance?

Long-term care insurance covers costs associated with lifelong illnesses that are not covered by Medicare. Many that purchase long-term care policies are often intending to relieve a partner or child of the work and cost of at-home or inpatient care. They may be looking to preserve their savings or worried that the price of long-term care will obliterate their financial legacy. 

Experts point out that addressing the possible benefit of long-term care insurance is particularly relevant for women. Typically, women will live, on average, longer than men. As they potentially outlive a male partner, they will more than likely use long-term health care facilities more often.

It’s worthwhile to note that long-term care insurance isn’t for everybody. Consumers in the “doughnut hole” or “dangerous middle” should take time to consider the pros and cons of investing in long-term care insurance. These are individuals with too much in savings to consider Medicaid taking care of their long-term health coverage, but not enough to pay for it out of pocket. 

Others may decide to place their trust in friends or family to look after them physically and financially as they age. Some people will prefer to take a chance and hope that the condition they develop later in life isn’t severe or long enough to require long-term care services. However, if you are someone who worries about burdening a significant other or a child, long-term care insurance may be beneficial to ensure your needs are meet. 

Do You Really Need Long-Term Care Insurance?

Millions of baby boomers are concerned about how to plan for the prospect of requiring expensive medical treatment in the future. Those in their mid-50s are in a good position to purchase long-term care insurance. That is assuming you will want coverage in the first place. If you are still undecided after researching and weighing the pros and cons, consider sorting through all the different variables before fully committing. 

What many have discovered is that healthcare costs are on the rise, as well as the insurance that covers them is just one part of the equation. There are more opportunities to consider thanks to new types of insurance. Recent speculations have raised doubts about how common a long nursing-home stay really is, which makes most reconsider the likelihood of needing coverage.

Even so, the majority are uncertain about the future of an economy on which they will be reliant for the next three decades. Insurers grossly underestimated the number of policyholders who would file insurance claims. As a result, there was a mass exodus of major players from the industry in recent years. 

And what was the response? The remaining insurers are raising their premiums significantly. According to financial analysts, monthly rates for a standard long-term-care policy have increased around 70 percent over the past ten years. The again, those old plans are half the price of what an individual approaching 70 has to pay today for the same coverage.

This is because the insurers who have stayed in business have increased the rate of new policies. According to the American Association for Long-Term Care Insurance, premiums increased by an average of 8.6 percent last year. For others, the rate increases are much worse. A healthy 55-year-old man in today’s world will spend $2,075 per year for comprehensive single coverage. This rate has increased approximately 17 percent from last year.

Overall, the answer to the question, “Do you need long-term-care insurance?” is a profoundly personal one and far from easy. Here’s how to consider the options.

The Guarantee of Insurance

You hope you never have to use long-term care insurance. Or, in the very least, you expect that if you aren’t fully self-sufficient, your partner or another family member will be able to support you in some way or another. However, if you need more assistance in everyday operations than a layperson can offer, require round-the-clock or more specialist medical services, you will have to pay for a health professional.

According to a 2014 Cost of Care Report, the national average for a shared room in a nursing home was $77,380 per year. Although, the cost can be much higher. For example, in Massachusetts, $120,000 per year is normal. Even assisted housing, which provides little one-on-one assistance and routine medical services, costs about $42,000 a year. 

When you’re recovering from an illness or accident, Medicare will only cover you for 100 days in a nursing home. And this insurance won’t cover you in assisted living or in your own house. Medicaid just pays for a nursing home and some in-home care, but only after you’ve used up all your money.

Long-term-care insurance pays at least a part of the cost of a nursing home, assisted-living unit, adult day care, or in-home assistance. In order to be eligible for benefits, you must be unable to perform at least two of the six activities of daily living (ADLs). ADL’s include bathing, washing, going from bed to chair, using the toilet, feeding, and maintaining continence. Additionally, a care professional must expect the condition to last at least 90 days.

How to Decide If You’re a Candidate

You can decide to take a chance and pay for your treatment with your savings. According to LIMRA, an insurance sector trade association, purchases of long-term-care premiums dropped by 24 percent in 2014 and are down 66 percent from 2004 peaks. According to financial analysts, only 13 percent of people aged 65 and over have a plan. 

Begin by valuing yourself. If you have between $200,000 and $2 million in cash, you’re a candidate for long-term-care benefits. You won’t be able to cover the cost of premiums if you have less. Understand the true odds. You may have heard figures that make rolling the dice seem like a foolish bet. One frequently cited stat is that 70 percent of Americans who reach 65 will eventually need some sort of long-term care.

As a single person, once you’ve whittled your savings down to as low as $2,000, Medicaid will cover most of the costs of treatment. Although you could fairly rely on paying your own way with $2 million. However, when caught in the middle, the solution isn’t always obvious.

However, according to a new study by the Center for Retirement Research, a large majority of individuals will require nursing-home services at or after the age of 65. That said, only a small few will stay long enough to rack up large bills. Before most long-term-care plans kick in, 50 percent of men and 39 percent of women stay fewer than 90 days. A man’s typical stay is less than a year, while a woman’s is a year and a half. 

According to recent reports, 30 to 40 percent of 65-year-olds will benefit financially from a long-term-care program. According to the report, this figure is near 20 percent. Patients are coming into treatment for a shorter amount of time, which drives down the value of long-term care insurance.  

Consider what you’re insuring. Long-term-care insurance is mainly concerned with the security of your assets. And if you don’t get insurance, you’ll be able to access treatment by investments and Medicaid if necessary. However, paying for it could mean foregoing an inheritance for your children.

Check to see if you have a choice. Health screening has increased by insurers. In general, 30 to 40 percent of candidates are turned down due to health concerns. When you’re younger, the odds of obtaining insurance are higher. Despite this, 17 percent of people aged 50 to 59 are excluded. This number has increased by 14 percent since 2009. Chronic health conditions such as diabetes and asthma, as well as any disease that may render you incapacitated, are common causes. If one insurer refuses a claim, it is common for other insurers to refuse it as well.

Examine the family tree. It isn’t just your well being that is important. Many insurers now look into your parents’ health status when you apply for insurance. You may not be eligible for the best deal if you have a family history of early-onset dementia or coronary heart disease.

You should also think about your family’s history. Treatment for dementia patients accounts for half of all insurance claims. A history of cancer, on the other hand, may advocate for little or no coverage because those affected often have a decent quality of life – up to a couple of months from the time they pass away. That’s a cold estimate, but it’s one you shouldn’t overlook. 

Risk Management for the Future

It’s all about risk management when it comes to long-term care insurance.

It all comes down to how you answer the following questions: 

1. Will a catastrophic accident (for example, being ill and needing long-term care services) overwhelm and deplete all your assets? 
2. How likely are you to need long-term treatment, considering your family history? 
3. Do you have enough retirement savings and wages to cover all long-term care expenses? 
4. Do you mind if your estate is reduced if you require long-term care?

You’ll know if long-term care insurance is right for you based on how you answered. According to a study conducted by Life Plans, Inc., almost two-thirds of those that purchased long-term care insurance do so to prevent relying on others (69 percent), secure their savings (67 percent), make long-term care facilities more accessible (66 percent), or maintain their quality of living (59 percent).

It is projected that two-thirds or more of those aged 65 and up would need long-term treatment at some point. But what’s also overlooked is that more than half of people who need treatment will only need it for three months or longer. This also happens to be the time span before most long-term care insurance policies kick in. Still, the average stay in a long-term care facility is between one and one-and-a-half years, with women staying longer than men in most cases.

That should help to mitigate the risk of blowing out all your savings. Further, simply because you like long-term care benefits does not mean you will be eligible. Insurance providers can be hesitant to take a gamble on your, particularly if your family has a history of early-onset dementia, heart disease, or diabetes. 

However, if protecting your estate is important to you and the thought of losing something keeps you up at night, you should consider long-term care insurance. The first decision you must make is which provider to work with. Although there are thousands of insurance providers operating in the United States, not all of them have long-term care insurance. As a result, deciding on the correct insurance carrier and plan can be difficult. Since you are essentially buying a promise to pay a claim in the future, the provider you pick might be even more critical than the policy itself.