Long-Term Care Insurance Options
About 70% of Americans who reach the age of 65 end up needing long-term care at some point in their remaining life. This was determined by a study from the U.S. Department of Health and Human Services. And, some people will get by with unpaid care from their own family members and others. But nearly half will end up needing some form of paid assistance. About 24% will need more than two years of paid care. About 15%, meanwhile, will need to spend over two years in a nursing home.
The costs of care are highly variable. There are a lot of questions to ask yourself. How long will you need long-term care for? How intensive will your needs end up being? And, where in the country do you live? The way to pay for services varies, too.
Traditional Medicare does not cover long-term care, beyond some skilled care right after hospitalization for an injury or illness. Some Medicare Advantage plans, from private insurers, offer supplemental coverage for services like meal delivery and rides to medical appointments, but these benefits are limited.
However, the largest single funding source is Medicaid, the joint federal and state program that covers lower-income Americans. Income limits vary by state. But, you typically can’t get Medicaid unless you exhaust most of your savings beyond your primary home and vehicle.
You also may or may not qualify for long-term care. Some pre-existing conditions may prevent you from being insurable. For example, if a medical condition causes you to already need help performing basic tasks like getting dressed. You can also potentially get a discounted premium if you and your spouse choose to purchase policies together.
If you decide to go ahead with a policy, there are a number of further considerations you may want to think about.
According to studies by the Society of Actuaries, the average time for claims in 2014 that lasted longer than a year ranged from three and a half years to four years in 2014. Typically, two to four years is a good ballpark estimate. Three years is about average. The longer the benefit period the policy offers, and the higher the policy benefit amount. And, the higher the cost will be for you, the policy buyer. Essentially, the longer the benefit period that the LTC policy offers, the higher the risk is that the client might end up paying thousands of dollars in premiums and nothing will return.
Clients who cannot afford to self-insure currently, because they do not have enough assets accumulated, may be able to buy an LTC policy during their earlier working years. As time marches on, there may be a point where their assets can support a long-term care event. And, at this point, they can terminate their policy or modify it for less coverage.
Keep in mind, when a single person goes into LTC their expenses may move laterally. But, let’s say you’re part of a couple. If one of you goes into care and the other doesn’t, the other spouse still has their usual living expenses. So you are faced with increased costs.
LTC usually turns into a less-than-ideal investment at a certain point. If you don’t happen to use it early, it can be a good investment. This is because you have paid fewer premiums upfront and are using the benefits. The longer you take to use a policy, the lower the returns on that policy will be. If you end up using the policy in the first five to ten years, this can be very, very advantageous.
However, the longer you take to use the benefits, the more sense it may make to just put money aside for yourself so that you can afford to self-insure. Of course, there is no way of actually knowing if and when an event will happen that puts you in need of long-term care.
One way you might be able to save up money for long-term care? Insurance products or annuities. These products may come with certain benefits when it comes to paying for long-term care.