If you had to guess, what are the chances that you will need long-term care, either at home or in a facility? Believe it or not, 70% of people who are 65 years old today will need long-term care at some point. And, while roughly a third of people will not need long-term support, 20% will need long-term care for more than five years. Since the odds of needing help are pretty high, and the odds of being able to finance extended help by yourself are not, it makes sense to think about how to pay for care before you need it. The answer may be long-term care insurance.
Just imagine what long-term care like that would cost. Some people are lucky enough to have family members care for them at home, but many people have to pay for care. If that care involves a nursing home, it could cost upwards of $100,000 per year for a private room. Even if you are able to pay those rates out of pocket, you may not be able to do so for very long. This is where the insurance comes into play.
Many people are unaware that regular health insurance, including Medicare, generally does not cover a stay in a nursing home or long-term care facility. Medicaid will, but in order to qualify for Medicaid you have to have limited income and “spend down” most of your assets. You would probably prefer to preserve assets for your family members, not pay them to a nursing home. Enter long-term care insurance, which helps to cover the cost of non-medical assistance needed due to a chronic illness, disability or injury, including care in a nursing home.
What if you need help with activities of daily living, but don’t need to be in a nursing home? Most long-term care insurance policies will cover the cost of that help in other environments, such as assisted living, adult day care, and even your own home. Having long-term care insurance that covers the cost of home assistance can make it less likely that you will need the more expensive services of a nursing home.
Long-term care insurance may also cover the cost of hospice care if appropriate. And if you are being cared for at home by family members, long-term care insurance may cover the cost of respite care for a few weeks a year. That can allow your caregivers the opportunity for a needed vacation with the assurance that you are being well-cared for.
When you decide to purchase a long-term care policy, you fill out an application and answer some basic health questions. You will probably be asked to sign a release so that the company can obtain some of your medical records.
You become eligible for benefits when you are unable to manage at least two of the following activities of daily living (ADL) on your own: bathing, dressing, caring for incontinence, getting on or off the toilet, transferring to or from a bed or chair, or eating.
You will likely have a range of options for coverage amounts; the more coverage, the higher the premium. You will not begin paying a premium until your coverage is approved and the policy is issued. You become eligible for benefits when you are unable to manage at least two of the following activities of daily living (ADL) on your own: bathing, dressing, caring for incontinence, getting on or off the toilet, transferring to or from a bed or chair, or eating.
When you make a claim, the insurance company will request documentation of your condition from your doctor and may send a nurse to evaluate you. The insurance company must also approve your plan of care. There may be a period of time, usually ranging from 30-90 days, in which you must pay for care out of pocket before receiving benefits. After that, your policy will pay up to your daily benefit limit until you reach your lifetime maximum benefit.
When a married couple purchases long-term care insurance together, they can sometimes share the total coverage amount. If one spouse needs care, but the other doesn’t, the first spouse can draw from the second spouse’s benefits.
The cost of a long-term care policy will vary based on a number of factors, including:
According to the American Association for Long-Term Care Insurance, in 2021, a 55 year old couple, each of whom purchases an initial benefit of $165,000, could expect to pay about $2080 in combined annual policy premiums. However, adding an option that increased benefits by 3% yearly would increase that estimated premium to $5025. A 5% annual increase option would increase the estimated premium to $8,575.
While those increases sound significant, the cost of even a single year in a nursing home for one person could make those premiums a good investment.
The younger you are, the lower your premiums are likely to be, but the longer you will be paying them. On the other hand, if you wait too long, you could develop a health condition that could exclude you from coverage. If you are able to get coverage, your premium may be prohibitively expensive.
Most people who purchase long-term care insurance do so between the ages of 55 and 65, though you can certainly purchase it earlier and may be able to purchase it later. Unfortunately, many people don’t think about getting long-term care insurance until they need it, and by then it is far too late.
Don’t be one of the unfortunate people who wait too long to buy long-term care coverage. If you have questions about long-term care that were not answered in this article, please contact our law office for more information.