Long term care insurance for parents Long Term Care Insurance: Definition, Costs – Policy Types

Long term care insurance for parents

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Long Term Care Insurance Information

Long term care insurance is best described as a product that provides Americans the means to fund the long term care facilities and services that they need whether in their elder years, during an illness, or after an accident.

As many households may be aware, long-term care and health care in the United States are sky-rocketing to unaffordable prices. So many people are struggling to meet their care demands because the expenses are simply too much to afford without outside help. In these circumstances, many are forced to rely on the value of their assets and savings, which may or may not be enough. Should they outlive their savings, older adults find themselves relying on their children for physical care and financial support. This then creates a cycle of generations providing care and then subsequently needing care in the future.

To help get a better understanding of long-term care insurance policies, here is a one-stop-shop to what it is, how it works, and everything else in-between.

Quick Article Guide

What is Long Term Care Insurance?

Long-term care insurance is a policy that helps pay for home care, nursing home, assisted living facility and other types of long-term care facilities. Policyholders pay premiums that are based on whether they might have illnesses or health conditions that could require ltc services but not shorten life spans

Individuals who purchase long term care insurance policies are those who wish to protect their assets, savings, resources, and family members from the potentially devastating costs.

What Does Long Term Care Insurance Cover?

Long-term care insurance covers different types of long term care services such as home care, nursing home, assisted living facility, adult day care and more. According to ALTCP cost of long term care, the average daily and monthly costs for U.S states are as follows:

• • • $267 a day or $8,121 per month in a private room in a nursing home.
    • $235 a day or $7,148 per month in a semi-private room in a nursing home.
    • $123 a day or $3,750 per month in a one-bedroom unit in an assisted living facility.
    • $70 a day or $1,517 per month in an adult day health care.
    • $131 a day or $3,994 per month for homemaker services.
    • $135 a day or $4,099 per month for home health aide.

The amount, however, depends on the type of services required and the duration of the actual care. For some health conditions that require years or even decades of care, such as Alzheimer’s disease, these costs can reach immense amounts.

To get a better view of how much long-term care services cost financially, here is a breakdown of the annual prices through the Cost of Care Survey released by Genworth last year:

Bear in mind that these figures are simply the average. In some states, these costs can go up to hundreds of thousands of dollars. Various online articles point to Alaska, Connecticut, and Massachusetts as the expensive states for long term care. The most pocket-friendly states for long term care listed online are Louisiana, Oklahoma, and Texas.

Are you aware: Louisiana, Oklahoma, and Texas are 3 of the 10 cheapest states for long term care.

Moreover, the cost of long-term care is not just financial. Because of the lack of resources of older individuals to pay for these services, they end up relying on their loved ones for the care. When this situation happens, their family members and loved ones face the emotional, social, mental, and physical costs that come with providing care. They become part of what is now known as The Sandwich Generation or the group of individuals stuck between caring for aging or ill loved ones and raising their own children. They end up paying thousands of dollars for out-of-pocket costs related to ltc, which means that they barely have enough to cover their needs and prepare for their own futures.

Without long-term care insurance, people facing care risk beginning this cycle that affects multiple generations in their own families.

How Does Long Term Care Insurance Work?

You need to meet two criteria: the benefit trigger and the elimination period before long term care insurance starts paying benefits.

Benefit triggers are defined as the qualifying events to qualify for long term care benefits. You can trigger your benefits when you can no longer two or more of six Activities of Daily Living or ADLs on your own or if you have a cognitive impairment such as Dementia.

The elimination period is the length of time that must pass after a benefit trigger happens before your long term care insurance starts paying for your long term care expenses.

Who Needs Long Term Care Insurance?

Long-term care insurance is designed to help people pay for long-term care. It’s a valuable insurance product that protects your family and your nest egg from the devastating cost of ltc.

The majority of long term care recipients are in their twilight years, which is why these services are typically associated with those who belong to the older generations. Moreover, studies have cited that 70% of individuals turning 65 can expect to require long-term care in the following years.

Although the duration often varies, the average years of care that people need are as follows:

Without long-term care coverage, individuals would have to cover the costs by other means for a number of years.

When to Buy Long Term Care Insurance?

A person who purchases a long term care insurance policy at 40 or 50 will pay lower long term care insurance premiums than those who buy in their late sixties. 21% of Americans 55 years old and below and 52% of those who are between 55 and 64 years old have purchased long-term care insurance.

Industry experts have always been adamant that the best time to purchase a policy is when the person is young and healthy, and they can qualify for coverage. This is because insurance providers value these two traits in their potential policyholders. Individuals who fit the bill can get various discounts such as good health discount which some companies offer up to 10%.

Where Can I Buy a Long Term Care Insurance Policy?

Purchase long term care insurance policies from reputable long term care insurance companies and providers. Consult different insurer rating agencies, like Moody’s, A.M. Best, and Fitch Ratings, to determine how insurers are doing in the industry.

Finding a reliable provider for investments as big as long term care policy is absolutely vital. Individuals must take the time to do research on insurance carriers to determine their stability and dependability.

Individuals can buy the best long term care insurance online by requesting free quotes from top long term care insurance providers.

Why Should I Buy Long Term Care Insurance?

People purchase long term care insurance policies because of different reasons, including protecting assets and maintaining their lifestyle, as well as ensuring the affordability of long-term care services and settings. This type of insurance is specifically engineered to address the growing problem that Americans have with long-term care. It provides the comprehensive coverage that Americans need to accommodate the costs of care in the country.

Because of the changing times—longevity, expensive health care costs and sky-high cost of living—Americans need secured coverage in place to maintain their lifestyles despite the need to pay for long-term care.

As shown in AHIP’s latest study below, the most important reason why people buy long-term care insurance is their desire to protect their assets and estate while avoiding dependence to family members is their lowest motivator to buy policies.

Long-term care, whether in-home or at a facility, is expensive. Relying on one’s savings might be feasible for a few, but many find themselves struggling to gather the funds required. Family members also end up being vulnerable to health and financial problems because they have taken up the burden of providing ltc.

Want to know if long term care insurance is right for you? Check out our Long Term Care Insurance Pros and Cons.

10 Important Long Term Care Insurance Policy Features

Listed below are key features that can change a policy’s coverage:

Inflation Protection

Many individuals view this long term care insurance rider as an absolute must when purchasing a policy, despite the chances of it increasing premiums. The three types are as follows:

• • • Future Purchase/Guarantee Purchase Option – This allows policyholders to increase their daily benefit amount every two to three years without having to meet additional underwriting. However, this may be expensive because each new offer is based on the policyholder’s current age. Insurers may also stop offering this option after two to three tries.
    • Simple Inflation – This increases the daily benefit by 5% every year. By the 19 th year and a half, a policyholder’s daily benefits will have doubled. However, as this type is typically included in the premium prices, the costs will increase by 40% to 60%.
    • Compound Inflation – This type increases the daily benefit by 3% to 5%, compounded annually. Experts have cited that this is more beneficial to younger and healthier individuals.

Cash Benefit

This rider is advantageous for people who wish to receive care at home. This is because this feature allows them to receive their cash benefit on a daily basis, regardless of whether they received care that day or not. It also entails that the coverage starts once one hour of care is used.

Moreover, people receiving care from loved ones can benefit from this because they do not need to provide the bills after eligibility is established. This means that care recipients can use the money to pay for services provided by family caregivers.

Daily Benefit

This is the maximum amount that your insurance provider will pay for covered ltc services in any given day.

Benefit Period

This refers to the minimum length of time your insurance provider will pay your benefits. The usual range is one year to unlimited coverage.

Elimination Period

Also known as a deductible or waiting period is the number of days you need to pay for long term care out-of-the-pocket before your insurance company begins to pay benefits. Elimination periods are 0, 30, 60, 90, 100, 180 and 365 days. The higher your deductible or elimination period, the more money you’ll pay initially.

Shared Care

Couples typically require two expensive plans to ensure that both individuals are covered. Naturally, this is worrisome, especially with the way the costs have been increasing over the years. In fact, studies show that approximately 25% of couples age 65 can expect to spend half a million on LTC services.

The shared care feature in LTC insurance policies allows couples—married or not—access to coverage that is enough for two individuals. This means that through this rider, couples get to combine their benefits into a pool which they can both have access to. So, for example, if both individuals have three years worth of coverage, they have six years between the two of them.

Survivor Waiver of Premiums

In case no claims were made against either policy when a spouse dies, the survivor’s premium will be waived permanently. But this varies depending on insurance companies.

Return of Premium

This is a type of rider that will return all or a portion of your premiums to your beneficiary upon the policyholder’s death.

Restoration of Benefits

This ensures that maximum benefits are enforced if you receive benefits for a certain period of time, then recover and stop receiving benefits for a period of time.

Nonforfeiture Benefits

This rider allows the policyholder to retain some policy benefit that is usually equal to the premiums paid-in just in case you lapse your policy. There are some states that require this provision.

Reimbursement vs. Indemnity

LTC insurance policies may pay the services through two methods. On the one hand, reimbursement policies pay benefits based on the services and expenses used. This means that policyholders typically pay for the services first, and then the policy, as the name implies, will reimburse the amount later on. On the other hand, indemnity policies pay a set amount, regardless of the actual expenses accrued.

Alternatives to Long Term Care Insurance

Other options are available to those who choose not to purchase a long-term care policy. However, people considering these options must be aware of what they exactly do before deciding.

Medicaid and Medicare

Many turn to government-funded programs, like Medicare and Medicaid, for the care services that they need. However, this is just a long term care misconception that Americans should stop believing. Medicare does not cover most long-term care services. Instead, it pays for some part-time services for individuals who are homebound as well as for those who require short-term skilled care. It may also cover the first 100 days at a nursing home facility.

Medicaid pays for long term care. However, as this program is catered to people with limited income, it enforces certain financial and health requirements that individuals must meet to qualify. Some have had to spend down their assets in order to be eligible for coverage.

Self-Insurance

This type of coverage is when individuals use their own savings and assets to fund any care services they might use in the future. The most appealing aspect of this strategy is that people who choose to self-insure do not have premiums to pay. However, planning to pay out-of-pocket is a big risk to take, and any miscalculations can lead to losing a great deal of money.

Reverse Mortgage

This strategy allows older individuals to convert part of the ownership of their house into cash. They get to remain in their own homes, and they do not need to repay the loan until they sell the house, no longer use it as the main residence, or pass on.

Life Insurance with LTC Rider

Life insurance policies offer riders that pay out for disabilities, ltc, critical illnesses, and chronic health conditions. However, the premiums for life insurance with long term care may be unaffordable because these are typically paid over shorter periods than ltc insurance policies.

Insurance companies may also offer annuities to help pay for nursing homes, assisted living facilities and other long-term care facilities. Individuals pay a company, whether in one go or through a series of payments. The company then provides a single payment or a series of payments over a specific and defined period.

Risk Factors and Considerations

Admittedly, long term care insurance is not for everyone. Many find the costs too expensive, which is why they choose to rely on other programs that may help. To help individuals decide whether this type of insurance is the better option, there are risk factors and consideration to take note of:

Personal Risk Factors

• • • Life expectancy – Longevity is a big issue among individuals seeking long-term care because the longer a person lives, the higher the chances of needing care gets. Look into lifestyle and family history to get a better picture.
    • Gender – As indicated above, women tend to need long-term care services longer than men. Moreover, women often end up facing the high costs without a partner after years of providing care to a spouse. This is why having a long term care policy is vital for women today.
    • Family health history – Families may have a number of health conditions and illnesses that require long-term care Researching on family health history may help individuals determine the chances of needing long-term care in the future.
    • Pre-existing conditions – There are some people who have certain pre-existing conditions that would make it impossible for them to qualify for long-term care insurance.

Top Reasons Why Applicants are Denied Coverage

• • • Needing help in ADLs or activities of daily living such as bathing, eating, dressing, transferring to a bed or chair or toileting.
    • Receiving care at home or staying at adult day care, nursing home, or facility care services.
    • Currently receiving narcotic pain medication.
    • Using walker, wheelchair, quad cane, motorized scooter, nebulizer, ventilator, hospital bed, oxygen, or kidney dialysis.
    • Currently in physical therapy.
    • Receiving disability benefits.

Conditions Why Applicants are Denied Coverage

• • • AIDS/HIV+
    • Alzheimer’s
    • Amputation due to disease
    • Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s Disease)
    • Cancer of bone, brain, esophagus, liver, pancreas, stomach
    • Cirrhosis of the liver
    • Congestive Heart Failure (CHF)
    • Cystic Fibrosis
    • Dementia
    • Frequent/Persistent forgetfulness or memory loss
    • Huntington’s Chorea
    • Chronic Kidney Disease
    • Metastatic Cancer (spread from original site)
    • Multiple Sclerosis
    • Muscular Dystrophy
    • Organ Transplant other than kidney or cornea
    • Organic Brain Syndrome
    • Paralysis
    • Parkinson’s Disease
    • Scleroderma
    • Schizophrenia or other forms of Psychosis
    • Systemic Lupus
    • Transient Ischemic Attack (TIA) within two years or more than one TIA

Financial Considerations

• • • Assets – One of the main reasons people get insured for long term care is because they want to protect their assets from the costs. Individuals ought to examine how much they have, and how much they are willing to sacrifice to pay for the costs of care.
    • Affordability of the Policy – Examine the stability of income. Can the current income sustain years of paying for premiums? Will other assets and savings be used to pay for this coverage? Bear in mind, as well, that these costs can go up in a few years.
    • Retirement – Can these costs be sustained even during retirement? Bear in mind that the years after retirement may mean limited income. Of course, this depends on the person’s lifestyle. After all, other people choose to continue working after turning 65 while others find other income-generating ventures.

Remember: Shop Around First

According to Women’s Health Care Tab in Retirement: $79,000 More Than Men’s, a post by Time.com, 75% of older individuals point to the expensive costs of care as one of their top fears in retirement.

This is why finding coverage is a must, but diving headfirst might be counterintuitive to the goal of finding good coverage for long-term care. People are often advised to shop first to see the available options in the market. The best way to do so is to request free quotes from top companies that are often offered online. Compare the prices offered as well as the coverage details indicated.

Moreover, individuals looking into purchasing a long term care insurance policy must be sure to discuss the details with insurance policy specialists. This way, the veterans in the business can answer any questions and clarify any confusion.

Fill out our quick form below to receive no-obligation quotes from top carriers.

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