Why Private Long-Term Care Insurance May Be Your Best Option

Do your retirement plans consider the need for long-term care? Many people fail to plan for long-term care – and that can be a devastating mistake. Most retirees will need long-term care at some point, and it is a major expense that is not typically covered under traditional health insurance. 

If you’re planning for your retirement, or if you have aging parents, it’s time to think about your long-term care options. These options may include self-funding care or relying on a public program, such as the new public long-term care program in Washington. For many people, private long-term care insurance is the best option. 

What Is Long-Term Care?

Long-term care refers to services that help a person with everyday activities, often called Activities of Daily Living (ADLs). These include bathing, getting dressed, eating, moving around, and using the toilet. 

A person who cannot manage these daily activities on their own will need help. This is long-term care. People may need long-term care due to their age or health issues, including injuries and illnesses. 

Most Seniors Will Need Long-Term Care

If you are currently healthy and active, it may be difficult to imagine that one day you will need long-term care. However, the reality is that most seniors will need this type of care. 

According to the Administration for Community Living, most people turning 65 will need long-term care at some point during their remaining years. The odds of needing long-term care increase with age. People with disabilities and chronic health conditions are more likely to need care. Also, women are more likely to need long-term care than men, and people who live alone are more likely to need paid care.

The Types of Long-Term Care

Long-term care can be provided in different ways, depending on the level of care a person needs, as well as the person’s finances and personal preferences.

Some long-term care services are provided in the home. A home health aide or other paid professional may come to the home to provide care. Unpaid caregivers, often family members, also sometimes provide long-term care.

Some long-term care services are provided outside of the home. A person who needs long-term care may go to a facility that provides adult day care services during the day. A person in need of long-term care may move into an assisted living or nursing care facility. 

Long-Term Care Is Expensive

The cost of long-term care will depend on a few factors, including the type of care needed and the location. Overall, professional long-term care services are very expensive.

According to the Administration for Community Living, these are the national average costs for long-term care:

• A semi-private room in a nursing home costs $6,844 a month.
• A one-bedroom unit in an assisted living facility costs $3,628 a month.
• A home health aide costs $20.50 an hour.
• Homemaker services cost $20 an hour.
• Adult day health care center services cost $68 per day. 

You Can’t Count on Health Insurance Coverage

Long-term care isn’t strictly medical in nature, so it’s not typically covered by health insurance. 

Medicare typically only pays for long-term care for a maximum of 100 days, and only when skilled services or rehabilitative care are needed. Non-skilled assistance with daily activities and care for more than 100 days may not be covered.

Medicaid may provide coverage. However, to qualify, you must meet your state’s income and resource requirements. 

Understanding Your Long-Term Care Payment Options 

Because health insurance does not typically provide adequate coverage for long-term care, other payment options are needed. 

Some people pay for long-term care using life insurance with a long-term care rider or accelerated death benefits option. It may also be possible to sell a life insurance policy in a life insurance settlement and use the cash to pay for care. However, before using this option, understand that you will be giving up the death benefit.

If you have a large amount in savings, you may try to self-fund long-term care. Keep in mind that long-term care is very expensive, so it is possible to drain your savings and still be short. Likewise, people who own a home may use a reverse mortgage to pay for coverage, but this can come with substantial fees and risks, and it will reduce the equity you have in your home.

Residents in Washington State now have access to the country’s first public long-term care program. This program will be funded through a payroll tax. To receive benefits, individuals must be Washington residents who have paid into the program for a qualifying number of years. It’s also important to note that the program currently has a lifetime benefit maximum of $36,500, and that this amount may not be nearly enough to cover the long-term care needs of many individuals. 

Some people rely on unpaid caregivers. These caregivers are usually spouses, adult children, or other family members. Caregiving can be very stressful for individuals, however, and this option may also lead to financial problems if the caregiver needs to leave work or reduce their hours at work. 

Another option is a standalone private long-term care insurance policy, or LTC insurance. As with other types of insurance, individuals pay a premium to buy coverage. Insurance companies will typically require information about the applicant’s health and age. Purchasing coverage is a good way of ensuring that your long-term care needs will be met. 

How Much Does Private Long-Term Care Insurance Cost?

Your long-term care insurance premiums costs will depend on a few factors, including your age and health. The amount of coverage you buy (including the length of the benefit term, the maximum monthly benefit and the waiting period) will also impact your rates.

Premiums will go up as you age or develop health conditions, so it may make sense to buy coverage early and lock in good rates.

According to the American Association for Long-Term Care Insurance, a couple, both age 65, might pay $4,800 a year for each person to buy a three-year policy with benefits starting at $5,00 a month and a 3% inflation compound growth. A couple, both age 75, might pay $8,700 a year for the same policies. 

Costs Will Increase

When making your long-term care plans, also consider the impact of inflation. The costs of long-term care will go up over the years, while the value of your savings will decrease. This means that even if you could afford long-term care now, you might not be able to afford it when you need it. LTC insurance can provide inflation protection.

Is a Private Long-Term Care Insurance Policy Right for You?

Most seniors will need long-term care at some point, and the associated costs can be financially devastating. If you do not have another way to pay for long-term care, a private long-term care insurance policy may be your best option. 

Legends United provides insurance solutions for the senior market, including Medicare Insurance and Final Expense Insurance. Contact us to talk to a licensed agent and explore your best insurance options.