Long Term Care Insurance is not a new insurance product; it was first offered in the early 1980s and has evolved over time, recently gaining popularity. This is due in part to product advancements, pricing stability, and the fact that the life expectancy of people in the United States has increased considerably.
I will cover everything relating about who should have long term care insurance.
The average life expectancy was around 65 just half a century ago; today, a considerable percentage of the population is expected to live up to 85 or longer. (ref. 2019 Social Security Actuarial Life Table)
A growing number of people, especially the baby-boomer generation, are approaching the stage of life when they might need long-term care.
By 2030, all baby boomers will be 65 or older; this tsunami of people turning 65 puts a strain on government long-term care programs like Medicaid ALTCS Arizona State Program and Veterans Pension benefits programs, making long-term care insurance even more expensive and more important to have in place.
Long-term care isn’t a topic that aging parents or their children like discussing. No individual wants to lose independence and rely on children, relatives, and friends for daily activities, such as bathing and dressing.
The fact that you are on the CareFundingSolutions.com site indicates that long-term care insurance is on your mind. This may be because a loved one or friend has required long-term care, and you are more aware of the need for long-term care insurance.
You have come to the right place.
Long-Term Care Insurance is not like other insurance policies; deciding to purchase long-term care insurance is both emotional and financial.
Here you can learn solid facts about Long-Term Care Insurance – benefits, drawbacks, costs, services, and more – before deciding whether to purchase long-term care insurance.
The what, why, who, when, and where of long-term care insurance.
What Is Long Term Care Insurance?
As you age, general weakness and health problems become common. You might require help performing day-to-day activities that you now take for granted.
Long-term care insurance helps pay for the services associated with personal and custodial care. These care services assist elderly and disabled people with the activities of daily living (ADLs).
Long-term care insurance covers care services in various settings, including nursing homes, assisted living facilities, community living centers, and in-home care services.
Long-term care insurance also covers care coordination, cooking, bathing, dressing, feeding, and medication management.
Long-term care insurance policies reimburse for a wide range of services. Many long-term care insurance companies allow you to pick and choose policies that offer the benefits specific to your needs.
Many people in their 70s and primarily 80s need long-term care.
However, regardless of age, medical conditions such as a stroke, heart attack, or early onset of cognitive disorders such as Alzheimer’s and Parkinson’s will precipitate the need for assistance with activities of daily living.
Disability due to accidents might also necessitate services covered by long-term care insurance.
Why Should You Consider Long-Term Care Insurance?
It would be wise to consider long-term care insurance because the latest statistics on this subject say so. And the numbers don’t lie.
According to the latest report by The Administration for Community Living, approximately 70% of people who live past 65 will need long-term care.
On average, men will need long-term care support for 2.2 years, whereas women will require such services for 3.7 years. As much as 20% of the 65+ population will need long-term care for more than five years.
More than anything, owning a long-term care policy offers peace of mind. Know about pros and cons of Long Term Care Insurance.
Long-term care insurance is a lot like having fire insurance. You don’t want or expect a fire incident to burn down your home, but having home insurance that covers fire damage will put you at ease and give you the confidence to meet the expenses if such events happen.
Comparing the Risk:
- Life insurance: 100% of us will die at some point, so the need for life insurance is self-evident. It is not a matter of if you need life insurance, it is how much life insurance do you need.
- Health insurance: Unless you are incredibly unusual or extremely wealthy, you will have a need for health insurance coverage throughout your life.
- Automobile Accident insurance: one out of every 240 people will have an auto accident and need car insurance.
- House fire insurance: one in every 1,200 homes will experience a fire.
- Long-term care insurance: one out of two people will need long-term care.
One in 1200 homes experience a fire, yet one out of two people will need long-term care insurance.
100% of people that own a home have fire insurance and would never consider not having coverage , yet only 22% of individuals own long-term care insurance.
To the question of how confident are those who own long-term care insurance about paying for long-term care if the need for such care arises, nearly 92% of people who had long-term care insurance answered they were totally confident or somewhat confident in their purchase.
Who Should Consider Long-Term Care Insurance and Who Should Not?
Long-term care insurance is for everyone except those with high fixed incomes.
If you are sandwiched between the extremely rich and extremely poor, then long-term care insurance is the best, and in most cases the only option, for paying for long-term care.
Who should have long-term care insurance?
- People who have an Average to Above Average Net Worth.
Most people prefer not to depend on their children and family for physical help as they get too frail to perform certain activities of daily living.
Paying for care out-of-pocket is out of the question unless you are a multimillionaire. Expenses for long-term care services can quickly wipe out your family’s savings in no time.
The average cost of some long-term care services in the United States as of 2020 is as follows:
- The annual cost of a private room in a nursing home is $105,850, and in Arizona is $96,353 per year, per ALTCS Arizona Medicaid.
- Homemaker services and health aides charge around $150 per day or $35 per hour in Arizona.
Several factors influence the cost of long-term care services. How much you’ll end up paying will depend on the type of care, the duration, and where you live.
You need to have a considerably large nest egg to pay out-of-pocket for your long-term care needs.
- People Who Don’t Qualify for Medicaid
Medicaid dominates any discussion on long-term care as it currently pays for 42% of long-term care costs in the US. However, many do not know that a large chunk of the population in the United States won’t qualify for the government-sponsored long-term care program without advanced Medicaid Planning.
The state-managed Medicaid program provides personal and custodial care for people in the low-income group.
To qualify for Medicaid, you need to prove you receive an income less than the limit prescribed by the state government and that your countable assets have a value less than what’s mandated by Medicaid. Keep on reading the article to know who should have long term care insurance.
Compared to Medicaid, long-term care insurance is more flexible. Plus, long-term care insurance is more liberal in covering in-home care services. Best of all, you can choose where you want to receive care.
This is the most significant negative with ALTCS or Medicaid. Not every care facility accepts ALTCS at the same time, and all communities, nursing homes, group care homes, and home care agencies take private funds to pay for care.
People with long-term care insurance can also benefit from the Medicaid program. With the state “Long Term Care Partnership Program,” an applicant can preserve assets and still qualify for ALTCS or Medicaid long-term care benefits.
- People Who Already Have Regular Health Insurance
Long-term care insurance and regular insurance are like chalk and cheese. Most services paid for by long-term care insurance are not medical in nature.
Most LTC policies are comprehensive. They cover personal care such as bathing, dressing and feeding, therapy including physical, speech and rehabilitation, and skilled nursing care.
Some LTC policies also cover homemaker services along with personal care services.
Steve Dabbs is a Certified Medicaid Planner with over 35 years’ experience. He has helped many people to get qualified for Medicaid Benefits.
Meeting Medicaid Requirements is a challenging task. A lot of applicants find their applications getting denied for approval due to many errors, so seeking professional help is something you should definitely consider!
Applying for Medicaid Benefits can be a very complicated process but Steve Dabbs can help you to get qualified for Medicaid through his Professional Value-Added Services that will save your Money and Time.
Health Insurance Does Not Pay for Long-Term Care
Some people believe a regular insurance policy would cover long-term care costs. Health insurance coverage for long-term care is limited if at all. In most cases, health insurance like Medicare and commercial or private health insurance policies pay only for skilled care for a short period of time.
- Regular insurance covers skilled care only if the requirement for such care follows recent hospitalization.
- Health insurance will pay only if the requirement is for skilled medical care. In the case of long-term care insurance, the services are not always medical in nature.
- Most health insurance policies do not reimburse for personal or custodial care.
Medigap, Medicare Supplements, and Medicare Advantage Plans (“Supplements”)
Supplement plans were introduced to make up for some of the shortcomings of Medicare. These programs pay for certain services not covered by Medicare. Supplements help individuals:
- Pay for deductibles and copayments
- Pay for short-term nursing home stays when the hospitalization is covered by Medicare
- Extend your doctor and hospital coverage
Like Medicare, supplement plans do not pay for long-term care services.
Your disability insurance won’t pay for long-term care either. Moreover, most of these policies won’t provide any benefits after age 65.
Disability insurance supplements income to make up for the loss of pay due to any disability.
As you can see, regular insurance is no substitute for long-term care insurance.
How Much Does Long-Term Care Insurance Cost?
The cost of the policy varies from one insurance provider to another. How much you’ll pay also depends on factors such as:
- Your age at the time of purchasing the long-term care insurance policy.
- The coverage and the benefits you need.
- The type of long-term care policy you choose.
The insurance company may hike your policy’s premiums in the future, where you have no option but to pay the increased premium.
That said, once the coverage begins, you are not required to pay premiums for the duration of the LTC.
“Keep in mind, you can write a little check to an insurance company now or write a big check to an assisted living community later!”
When Does Long Term Care Coverage Start?
Policyholders need to satisfy two essential criteria to receive benefits.
The Benefit Trigger
Insurance companies use the ‘benefit trigger’ to determine whether you qualify for assistance. The process involves filing an assessment form by a social worker or nurse.
The insurance carrier appoints the assessment worker who would determine your eligibility based on the severity of cognitive impairment or your ability to perform Activities of Daily Living (ADLs).
In most cases, the company will decide to pay if you need help performing two or more ADLs.
The Elimination Period
Long-term care insurance beneficiaries will not receive assistance as soon as the benefit trigger occurs. The beneficiary has to wait for a short duration – called the elimination period – before receiving payment for LTC services.
It’s up to the beneficiary to decide the elimination period when choosing the policy. The elimination period could be anywhere between 0 to 365 days.
You – the beneficiary – will have to pay out-of-pocket for personal and custodial care services during the elimination period.
When Should You Buy Long Term Care Insurance?
There are still many who think of long-term care insurance only after the need arises. Timing is crucial in long-term care insurance.
Those who wait too long to purchase a long-term care insurance policy will face high premiums. Some become ineligible due to a pre-existing medical condition, so don’t wait before it is too late.
The other extreme of buying too early has some drawbacks. When purchasing too early, the policyholder has to pay premiums for a long time before becoming eligible to receive benefits.
Is there a best age to buy long-term care insurance? According to The American Association for Long-Term Care Insurance, the sweet spot – the ideal time to buy long-term care insurance — is in a person’s mid-50s to early 60s.
Many experts second this recommendation even though most claims occur when the policyholders are in their 70s, 80s, or even 90s.
The following two points will convince you to abide by the organization’s recommendation.
- Roughly 23% of all applications of people in their 60s are denied by insurance companies. This is nearly double the policy applications denied to people in their 50s.
- Although the Affordable Care Act prevents insurance companies from excluding applicants with pre-existing health problems, the rule doesn’t extend to long-term care policies.
If you are over 65, a Short-Term Care program may be a smart alternative to long-term care insurance.
What Are the Different Types of Long Term Care Insurance?
People looking for long-term care insurance now have more choices than ever. That said, long-term care insurance can be broadly classified into two main types.
- Traditional Long-Term Care Insurance
The traditional or stand-alone policy offers the most coverage for your dollar.
The policy gives you greater control over your future. At the same time, it protects your family and friends from the impact of your long-term care needs. Traditional Long-Term Care Insurance has been available for decades and has the following components:
- To purchase a policy from an insurance company, you need to be in reasonably good health.
- You have to pay a premium from the time you purchase the policy. The premiums can be paid monthly, quarterly, semi-annually, or annually, depending on the insurance company.
- When you file a claim, you have to prove you are cognitively impaired (suffering from Parkinson’s or Alzheimer’s) or require assistance with at least two ADLs.
- If you never require or claim benefits, neither you nor your heirs can collect any payment from the insurance company.
- The insurance company can increase premiums in the future. Some insurance companies may give you the option to pay the increased premium or retain the same premium but with reduced coverage (fewer benefits) under the same policy.
- The elimination period can range from 0 to 365 days.
- The benefits period generally ranges from two to six years depending on the insurance carrier.
- Nowadays, most policies under this category cover nursing home and in-home care services.
- Some policies allow you to include additional benefits such as coverage for home modification, allowing a family member to provide in-home care, or hiring a care manager.
The policy you purchase will specify how the insurance company will pay.
Cash Benefits Policy: The Company will pay the full daily benefits, and you need not show proof of care services received.
Indemnity Policy: The Company will pay the daily benefit upon proof that at least one care service was received per day.
Reimbursement Policy: You submit receipts or other documents proving you paid for care services out-of-pocket, and the Company will reimburse you up to the maximum daily benefit limit.
- Modern Asset-Based Long-Term Care Insurance
Asset-based long-term care insurance is fast gaining popularity because of the flexibility it offers. Some also refer to it as a hybrid long-term care plan.
As the name suggests, this type of policy generally combines two types of coverage under one plan.
For example, companies can offer a hybrid policy that covers both life insurance and long-term care. Alternatively, the policy could be a combination of an annuity and long-term care plan.
Such policies are called asset-based because they are funded with your savings, home equity, retirement account, or a wide variety of different assets.
How Does Life Insurance-Based Long-Term Care Work?
In a life insurance policy, after death, the company pays the death benefit to your heirs or anyone nominated as the beneficiary.
The beneficiaries can use the death benefit to pay for funeral expenses, clear debts, or fulfill any financial needs.
If you have the hybrid plan, you could, when the need arises, use the death benefit money to pay for your long-term care.
If you never claim the long-term care benefits, the money will be paid to the nominee after your death.
How Does an Annuity-Based Long-Term Care Work?
An annuity is also an insurance contract. In an annuity contract, you either pay a lump sum amount (once) or make periodic payments (monthly or annually, depending on the insurer).
The beneficiary can choose a policy that starts making payments immediately. In contrast, as in long-term care insurance, the beneficiary can fix the benefit payment to start at a later date.
Depending on the policy, the payment will be made for a fixed period or until the beneficiary’s death.
In annuity-based long-term care, at the time of the beneficiary’s death, any money remaining under the policy will be passed to the heirs.
Where can I buy Long Term care Insurance?
It should be clear by now that long-term care insurance is quite different from other forms of insurance. It’s as important as health insurance, but a lot more complex.
Hence, once you make up your mind to buy long-term care insurance, the next logical step is to decide where and from whom to buy it.
The biggest mistake that most people make is to approach a non-certified insurance agent or broker.
Sadly, most of them do not possess the necessary qualifications. They are not trained to handle the complexities of such policies or advise about long-term care insurance products impartially.
If you are making a long-term care plan for yourself or a loved one, the first and most important step is to engage a specialized advisor.
One way to ensure you get the best and unbiased advice on the subject is to approach an agent with a CLTC designation.
A professional with a CLTC designation will help you understand and plan long-term careas well as advise on the best long-term care insurance policy that would suit your needs and the best insurance carrier who offers the policy.
Certified in Long-Term Care (CLTC) is the long-term care insurance industry’s first professional designation. The certification program was launched in 1999 by The Corporation of Long-Term Care Certification. The program remains the only third-party-issued LTC certification.
Here are six more reasons to engage a long-term care insurance advisor with a CLTC designation:
(a) Long-term care insurance professionals with a CLTC designation do not focus on selling a product. Rather, they help create a comprehensive plan for your long-term care to protect your physical, financial, and emotional well-being.
(b) An insurance professional with a CLTC designation is well-versed in the technical aspects of long-term care and a variety of other programs such as Medicaid and Medicare.
(c) Professionals with a CLTC designation are also trained in interpersonal skills. Since long-term care in most cases is a family affair, a matter of trust, and a subject filled with emotions, the advisor must be competent to carry out difficult conversations with clients.
(d) CLTC is one of the most popular certification programs recognized by most insurance carriers. The CLTC designation is acknowledged by several online financial portals and major national publications.
(e) CLTC is an independent, third-party designation not affiliated with any insurance company. In addition, insurance professionals with a CLTC designation are expected to adhere to a strict code of conduct that would boost trust and credibility.
(f) CLTC-designated professionals are expected to stay abreast of the latest changes and developments in the field of long-term care insurance. The professionals are required to renew their designation by taking a CLTC renewal course every two years.
The fear of losing control over life and depending on others to fulfill basic daily needs can shatter the peace of mind of any person. Everyone needs a plan to meet the challenges of old age. I hope you got good understanding about who should have long term care insurance.
Although there are many options, such as Medicaid, long-term care insurance is by far the best option for affording quality long-term care.
Long-term care insurance ensures your independence and protects you and your loved ones from the financial, physical, and psychological challenges that might arise in the future.
Even though you think you’ll never need long-term care, it’s best to be prepared. This guide is the best place to prepare and plan your long-term care.
Steve Dabbs is a Certified Medicaid Planner™, a VA Accredited Claims, accredited by the Dept. of Veterans Affairs, and an Accredited Investment Fiduciary®. He helps people to apply and qualify for ALTCS Arizona Long-Term Care and VA Aid and Attendance Benefits.
Applying for ALTCS or VA Aid and Attendance benefits can be complicated, but Steve Dabbs can save your Time and Money by reducing delays and claims denials.
He is a Fiduciary, so as a Fiduciary, he must do what is in the best interest of his Clients.