While discussing the possible reality of needing help towards the end of your life can be uncomfortable, discovering the best options for payment now if that situation does occur will ensure you can get the support you will need without draining your hard-earned savings. This is where long-term care (LTC) insurance comes into play.
Consider the following scenario: an elderly couple has worked hard and built up a “nest egg” of savings worth around $250,000. At 68, the man develops Alzheimer’s disease and begins utilizing their savings for home health care and then eventually goes to a nursing home. After just a few years he passes away and his wife is left with a depleted nest and must work full time to provide a living for herself.
This type of financial scenario occurs in the lives of many Americans every year. With long-term life insurance in place, you can ensure health services will be available without jeopardizing the financial well-being of your family later on.
Long-term care insurance is designed to supply financial means to afford nursing home and assisted living services as someone approaches old age or in the event of developing an illness that would require aid with regular daily personal care functions.
This type of insurance is important considering the high costs of end-of-life care which can range between $230,000-360,000 according to data from the Alzheimer’s Association in 2019. Also, most health and disability insurance policies do not include long-term care coverage.
A good method of action would be to consult an independent insurance broker who understands this type of insurance and will work to get you the best policy while saving you time and money.
- Nursing home care
- Assisted living facilities
- Adult day care services
- In-home care
- Home modification
- Coordination of care services
In 2018, 14 million adults obtained some form of long-term care service. The possibility that you or your loved one will one day need these types of care is reason to purchase long-term care insurance to protect your savings you worked long and hard to secure or to prevent other family members from bearing the burden of such a substantial financial load.
Also, do not rely on Medicare or Medicaid to cover long-term care expenses. Medicare does not provide coverage at all and Medicaid is limited in its scope and ability to help and requires certain qualifications to receive aid.
Do not make the fraudulent mistake of allowing family to transfer assets out of their relatives name who needs care in order to qualify for government aid.
Traditional long-term care insurance is simply an insurance policy that offers to cover the expenses for LTC if and when it is necessary. Coverage from this type of policy activates when you can no longer perform two out of six of the activities within a specified criteria of daily activities. Diagnosis of severe cognitive impairment will also initiate your insurance policy. Benefits typically arrive in 30-90 days.
As a reference, the nationwide average for nursing home services is approximately $90,155/year; $48,600/year for assisted living care and $144/day for home health aides. These hefty prices can be at least partially covered through a traditional long-term care insurance policy.
On average, a 60-year-old couple will pay an insurance premium of approximately $3,400/year ($283/month). This insurance will provide roughly $163/day for a set number of years. Inflation riders are also available to increase your benefit over time to meet the rising prices of care as time progresses.
Some insurance providers offer a hybrid package that includes both life and long-term care insurance in the same premium. One advantage of this policy is that participants can access the life insurance death benefit while they are still alive in the event they need to fund long-term care. If long-term care is not needed, the full life insurance payout is still granted to their heirs.
One clear disadvantage of a hybrid policy is the expensive cost. Unlike traditional long-term care policies, hybrids can be thousands of dollars more costly and are not tax-deductible. Unless a traditional LTC policy is unavailable due to medical underwriting, it is advisable to purchase long-term care insurance and life insurance separately.
Although it may seem logical to buy long-term care insurance at a relatively younger age to qualify for lower premiums, this type of care is typically not needed until after 70 years of age and therefore will actually end up costing you thousands more dollars overall if you purchase this insurance too early. Instead, the target age for purchasing LTC insurance is 60 years.
To illustrate this point, the average annual premium for a 50-year-old is $1,657 and $1,811 for a 60-year-old. If the policy remains in effect until age 95, the person who bought LTC insurance at age 50 will have paid $74,565 in premiums, whereas the person who bought it at age 60 will have spent $63,385. Consider instead investing that money you may have paid into a policy between the ages of 50 and 60 to help add to your financial savings for the future!
If you are particularly concerned about developing an illness or condition that would require long-term care services before the age of 60, go ahead and purchase your insurance earlier for peace of mind but in all other circumstances it will prove better to hold off until 60-years-old or older.
An independent insurance agent is trained in finding you the best policy based on your age, situation, geographic location, current health, etc. They have access to research regarding various insurance companies and will be able to determine the best fit for your unique needs.