- Healthcare costs and long-term care expenses are one of the biggest concerns today for many people. Long-term (LT) care insurance will help protect you against the significant financial risk posed by the potential need for long-term care services either in the nursing home, assisted-living facility, or even in your own home. These policies can help you preserve your assets for your spouse and/or heirs. They are purchased for resource protection, to minimize the dependence on various other family members, and to have some control of exactly where and how you will receive long-term care services.
LT care goes over and above medical and nursing care to include all the assistance you will need if you have a chronic illness or disability that leaves you unable to care for yourself. The US Department of Health indicates that people age 65 face at least a 40% lifetime risk of entering a nursing home sometime during their life, and 10% will stay there five years or longer. The odds of entering a nursing home increase with age, and currently 22% of people age 85 or older are in a nursing home. While older people are more likely to need LUXURY TOURING care, your need for it can come at any age. The average cost of a personal nursing home room is about $70, 000-$75, 000 per year. These costs vary significantly based on what area of the country you live in. The typical stay in a nursing home is in between 90 days and four years (average is 2-2. 5 years). Advantages are typically triggered when you can’t perform two “activities of daily living” such as bathing, feeding yourself, dressing up, getting from bed to chair, and going to the bathroom (and the condition is expected to last at least 90 days). Benefits can also be triggered in case you develop severe cognitive impairment (such Alzheimer’s).
Aren’t I already protected for this? No .
Generally Medicare and many regular health insurance plans will not include long-term care costs. Medicare additional insurance (Medigap) also typically will not cover LT care costs.
Which should buy LT care insurance? Which shouldn’t bother?
Wealthy people (with assets over $3M) that can pay for care on their own typically don’t need to buy LT care insurance (they may basically “self-insure”). For a very rich family if they are forced to live in the nursing home for 3 years from $75, 000 per year the total cost of $225, 000 will not wipe all of them out. Some wealth people purchase LT care insurance anyway for your peace of mind and for emotional reasons. “It allows loved ones to care about you rather than caring for you” says Jesse Slome, executive director of the American Association for LT Care Insurance plan. Those with little assets (below $300, 000) also are not great candidates because they likely can’t afford the protection anyway, and they have a smaller amount of assets to shield. Medicaid may take over coverage after they have exhausted their assets (depending on the state). People in the middle when it comes to wealth are good candidates for LT care insurance. People who have no family members nearby that could help take care of them usually consider LT care insurance. Solitary people who have relatives nearby and don’t really care about leaving an estate may not need/want LT care insurance. Should you have a family history of long-term incapacitating illnesses like Alzheimer’s, you should think about this type of insurance (and longer duration associated with insurance) because those types of illnesses often cause people to need LT care for many years.
When should I buy it? At what age?
The typical range people buy this insurance is among ages 45 and 70. The particular premiums increase as you get older (and are thus more likely to end up in the nursing home). The premiums start to increase especially as you get over age 60 and are very expensive at age 70+. If you don’t have a family history of chronic illnesses and you are in good health you can most likely wait until you are around 55-60 years of age to buy.
What are the variables that figure out how much my LT care coverage will cost? What are important things to consider when shopping for a policy?
1 . Duration associated with coverage (this can range from a few years coverage up to unlimited or lifetime). Given that the average nursing house stay is typically only a few years, life time coverage is likely too much for most people and is very expensive.
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Usually 2-6 years of insurance coverage is enough.
2 . Elimination period. This really is similar to the deductible on other insurance policies. Your LT care policy doesn’t start paying out for a certain variety of days. This elimination period is normally 30-90 days.
3. What exactly is covered? Skilled care and non-skilled treatment covered? Does it cover help at home? Assisted living? Adult day care? Will the policy require a hospital stay before this (home care) benefit is available? Are pre-existing conditions excluded from coverage? Is Alzheimer’s covered? Most policies exclude coverage for some mental and nervous disorders, addiction to alcohol, drug abuse, and care after self-inflicted injury.
4. Amount of coverage per day? The higher your daily benefit, the higher your premiums. Typical amounts covered are $100-$200/day of costs. The average cost of a nursing home is around $200/day.
5. Inflation adjusted or not? This is important and makes a big difference over long time periods. It also greatly increases the cost (and value) of the policy. May be the inflation protection “compound” (increases with a set percentage each year) or “simple” (increases by a set money amount each year)? Compound inflation protection is better.