Long Term Care

Long-term care as we are all living longer there are some things you should know about long-term care.

As life expectancies continue to increase, the likelihood that more people will need it also increases. In fact, research shows that at least 6.4 million people age 65 or older need long-term care, with half of people over age 85 requiring long-term care. Here are a few things you should know.

What is long-term care?

Simply put, long-term care refers to the services beyond medical and nursing care used by people with disabilities or chronic injuries.

Why should I consider long-term care insurance?

The cost of long-term can add up quicker than you think. For example, the cost of services provided by a nursing facility can exceed $82,000 annually, or more than $6,844 per month.[i]

Many people mistakenly assume that Medicare or their regular health insurance will cover long-term care expenses like these. However, Medicare only covers long-term care under narrowly defined circumstances, and only for a short period of time. Even supplemental policies or standard health insurance policies may not cover long-term care expenses. It is for these reasons, you should consider Long-term care insurance.

Do I need long-term care or can I self-insure?

You may not need long-term care insurance if you have sufficient funds to cover the costs without seriously depleting your assets, or if you have very few assets and qualify for Medi-Cal (in California).

What does long-term care cover?

Typically, it covers the cost of the following:

  • Help in your home with daily activities, such as bathing, toileting, dressing, eating and housecleaning.
  • Community programs, including adult day care.
  • Assisted living services that are provided in a special residential setting other than your own home. These services include meals, health monitoring and help with daily activities.
  • Visiting nurses and nursing home care.

What should my plan cover?

The financial strength and stability of the insurer. Since the value of your policy is based on the claims-paying ability of the issuer, you’ll want to choose an insurance company that stands on solid financial footing. Opting for a low-cost policy could mean you don’t have the money you thought you’d have when you need it.

Policy details

Make sure you understand when the long-term care policy will pay out, for what services (such as nursing home care and/or home care) and for how long. You’ll also want to determine the conditions that will trigger coverage. For example, some policies may require that you be unable to perform one or two activities of daily living, such as bathing and dressing, in order to start paying out, while others may require a greater level of incapacitation.

Elimination period

You’ll want to determine how long you’ll need to wait from when the disability begins, to when your contract will start paying. This could be less than 30 days or more than 100 days.*** It’s possible to save money on premiums by choosing a longer waiting period, but keep in mind that your care could be very expensive during this time.

Excluded conditions

It’s important for you to fully understand any limitations of your policy, such as exclusions for pre-existing or certain conditions. For example, some policies may exclude coverage for mental or nervous disorders. Others may sell a policy to someone with a pre-existing condition, but not pay benefits relating to that condition for a specified period.

Inflation coverage

Consider a policy that has an inflation adjustment. You’ll likely have to pay extra for it, but it could be worthwhile, especially considering that over the past couple of decades, health care costs have risen faster than inflation.

Buy sooner, rather than later

Long-term care insurance premiums are based on age at the time of purchase. The younger you are when you purchase a policy, the less expensive it will be. If you wait until you are older, there’s a chance you may be too high risk for an insurer to cover you, or the premiums may be beyond your budget.

As long-term care calls for financial planning for your health needs, especially as you approach retirement, you’ll want to talk to an insurance agent about long-term care insurance sooner than later.

Source: United Seniors Health Council (now The National Council on the Aging), www.ncoa.org.

** Source: American Health Care Association, National Center for Assisted Living, www.longtermcareliving.com

*** Source: American Association for Long Term Care Insurance, www.aaltci.org.

[i] https://acl.gov/ltc/costs-and-who-pays/costs-of-care