If you’re nearing retirement, planning for long-term care becomes more important with each passing day. Growing demand is driving up the price of policies and diminishing the benefits. To ease your worries about affording care later in life, you’ll want to take the time to consider the best long-term care (LTC) insurance now.
What is Long-Term Care (LTC) Insurance?
LTC insurance helps cover the costs associated with long-term care if you become disabled or chronically ill. The type of care included can range from assistance with everyday activities, such as getting out of bed, bathing, dressing, and going to the toilet to skilled care provided by nurses, physical therapists and other medical professionals. It can also help with household tasks, such as cleaning, meal preparation and managing your money.
Long-term care can be received in a variety of places, including at your own home, or in an assisted-living facility. Regardless of where you obtain long-term care, the costs are rising year or year.
How Much Does Long-term Care Insurance Cost?
Long-term care is considered very expensive, especially for those who no longer have a source of income. The average annual cost of a semi-private room in a nursing home carries a hefty price tag of $85,775, and if you want a private room, you’ll have to fork out an extra $12,000 per year. According to Genworth’s 2017 Cost of Care Survey, these figures represent an increase of 4% over the last five years.
How Can I Pay for Long-term Care?
Unfortunately, most employer-based health insurance policies won’t pay for long-term care services. You also shouldn’t assume Medicare will cover the costs either. Medicare only pays a percentage of short stays within trained nursing facilities (up to 100 days) or home health care under very limited conditions. It does not assist with activities of daily living.
A long-term care insurance plan can help cover some of your long-term care expenses. Policies offer a variety of courage levels and choosing the wrong policy could be financially devastating. When planning for retirement consider the following tips to ensure you choose the right long-term health insurance plan for your needs.
How to Choose a Long-term Insurance Plan?
Don’t Wait Until it’s Too Late
Policies are less expensive if purchased when you’re younger, since our health deteriorates with age and the risk for a variety of illness increases. If you develop a serious health condition, you may not be able to find a health insurance company willing to cover you, and the chances are if you do, you’ll end up paying considerably more. According to American Association for Long-Term Care Insurance, 24% of those who apply for LTCI between the ages 60 and 69 are denied coverage and a further 45% after the age of 70. Industry experts say the most affordable time to buy LTC insurance is between the ages of 55 and 60.
Consider your Income and Assets
Depending on your income and assets, you may quickly qualify for Medicaid within a few years of needing long-term care. In most states, Medicaid covers long-term care services delivered at home and within skilled nursing facilities, but only for those who meet specific requirements, including having income and assets that don’t exceed particular levels set by your state government. Unfortunately, to qualify for Medicaid, you must first exhaust almost all your financial resources. If Medicare determines you have made donations or transferred money, you will be ineligible for a period of time.
Pay Close Attention to Premiums
The price of LTCI varies significantly between insurers. For example, a 60-year-old couple can expect to pay an annual premium ranging from $2,605 to $4,935 for benefit value of $338,000 with 5% growth per year. It’s, therefore, a smart idea, to seek the help of a knowledgeable long-term care insurance professional who can decipher exactly what you need. You’ll want to find a policy with premiums you know you can afford now and in the future. If you find yourself in a situation where you can no longer afford your premiums, you risk losing all the money you’ve already invested in your policy.
Consider your Support Network
In case of an urgent situation, do you have friends or family that you can rely on for help? You may be fortunate enough to have a family member willing to provide long-term care services. However, it’s important to consider if you want their help and how much you can rely on a single person to assist with everyday activities.
Don’t Forget About Inflation Protection
Like all products and services, the cost of long-term care increases over time. It is therefore essential to choose a policy that will grow over time as well (inflate). People typically begin receiving care when they’re aged between 70 and 80. For many of the baby boomers, this may be 25-30 years from now.
Depending on the policy, the inflation protection offered can range from 0% to 5%, with most plans offering an adjustment rate of 3%. You may think such small percentages will not make a big difference. But, over the course of 20-30 years, an adjustment rate of 3% can add hundreds of thousands to your benefit pool.
Length of Elimination Period
Long-term care policies feature an elimination period, during which you are required to wait for your policy to begin before receiving benefits. Long-term care services that are needed while in the elimination period will mean that you pay 100% of the care received until your policy kicks in. Elimination periods can range in length from a month to a year, with longer waiting times resulting in reduced premiums.
It’s also worth considering that Medicare, in some circumstances, covers a portion of short-term stays in skilled nursing facilities for medically necessary conditions (100% of first 20 days, and a daily co-payment for 80 days after). This means you may not incur any out-of-pocket-costs for a short stay, even if you are in the elimination period of your policy. You need to decide whether that’s a risk you’re willing to take.
Calendar Day vs Service Day
Be sure to compare the benefits of a “calendar-day” or “service-day” elimination period. A calendar-day elimination period begins on the very first day you certify the need for long-term care services. Whereas, when you choose a service-day elimination period, one day of certified care accounts for a single day of the waiting term. For those who don’t need care seven days a week, this option could end up lasting much longer than expected.
Look out for Discounts
Discuss opportunities to save with a long-term care specialist. You may qualify for premium discounts based on your excellent health, marital status, employee group, or multi-family member coverage. You can also save by purchasing multiple policies within one provider.
Need Help Choosing a Long-term Care Insurance Plan?
If you’re nearing retirement, or already in retirement, it makes sense to seek advice about your future care needs. Choosing a long-term care insurance plan can be overwhelming, especially when you take into account the array of providers and policy options. If you’ve got any questions, we’ve got you covered. Call us today to discuss what discounts are available to you.
