What is Long-Term Care Insurance?

It might be hard to imagine, but at some day you may need some help taking care of yourself. The big question is: How will you pay for it?

Buying long-term care insurance is one way to prepare. Long-term care refers to a host of services that aren’t covered by regular health insurance. This includes assistance with routine daily activities, like bathing, dressing or getting in and out of bed.

A long-term care insurance policy helps cover the costs of that care when you have a chronic medical condition, a disability or a disorder such as Alzheimer’s disease. Most policies will reimburse you for care given in a variety of places, such as:

• Your home
• A nursing home
• An assisted living facility
• An adult day care center

Considering long-term care costs is an important part of any long-range financial plan, especially in your 50s and beyond. Waiting until you need care to buy coverage is not an option, as you won’t qualify for long-term care insurance if you already have a debilitating condition. Most people with long-term care insurance buy it in their mid-50s to mid-60s.

About half of 65-year-olds today will eventually develop a disability and require some long-term care services, according to a study revised in 2016 by the Urban Institute and the U.S. Department of Health & Human Services. Most will need services for less than two years, but about 14% will require care for more than five years.

Regular health insurance doesn’t cover long-term care, and only covers short nursing home stays or limited amounts of home health care. It does not pay for custodial care, which includes supervision and help with day-to-day tasks.

If you don’t have insurance to cover long-term care, you’ll have to pay for it yourself.

People buy long-term care insurance for two reasons:
To protect savings. Long-term care costs can deplete a retirement nest egg quickly. The median cost of care in a semi-private nursing home room is $89,297 a year, according to Genworth’s 2018 Cost of Care Survey.

To give you more choices for care. The more money you can spend, the better the quality of care you can receive. If you rely on Medicaid, your choices will be limited to the nursing homes that accept payments from the government program.
 
How long-term care insurance works:
To buy a long-term care insurance policy, you fill out an application and answer health questions. The insurer may ask to see medical records and interview you by phone or face to face.

You will choose the amount of coverage you want, but policies usually cap the amount paid out per day and the amount paid during your lifetime.

Once you are approved for coverage and the policy is issued, you will begin paying premiums.

Some companies offer a “shared care” option for couples when both spouses buy policies. This lets you share the total amount of coverage, so you can draw from your spouse’s pool of benefits if you reach the limit on your policy.

Cost of long-term care insurance

The rates you pay will depend on a variety of things, including:
Your age and health: The older you are and the more health problems you have, the more you’ll pay when you buy a policy.

Gender: Women generally pay more than men because they live longer and have a greater chance of making long-term care insurance claims.

Marital status: Premiums are lower for married people than single people.

Insurance company: Prices for the same amount of coverage will vary among insurance companies. That’s why it’s important to compare quotes from different carriers.

Amount of coverage: You’ll pay more for richer coverage, such as higher limits on the daily and lifetime benefits, cost-of-living adjustments to protect against inflation, shorter elimination periods, and fewer restrictions on the types of care covered.

Tax advantages of buying long-term care insurance

Long-term care insurance can have some tax advantages if you itemize deductions, especially as you get older. The federal and some state tax codes will let you count part or all of your long-term care insurance premiums as medical expenses, which are tax deductible if they meet a certain threshold.

How to buy long-term care insurance

You can buy directly from an insurance company or through an agent.

You might also be able to buy a long-term care policy at work. Some employers offer the opportunity to purchase coverage from their brokers at group rates. Usually when you buy coverage this way, you’ll have to answer some health questions, but it could be easier to qualify than if you buy it on your own.

Get quotes from several companies for the same coverage to compare prices. That holds true even if you’re offered a deal at work; despite the group discount, you might find better rates elsewhere.

As you make a long-range financial plan, the potential cost of long-term care is one of the important things you’ll want to consider.

To learn more and to discuss what would work best for you, contact us at Tacoma Elder Care today!