What is Long-Term Care Insurance and Who Needs It?
Updated for September, 2021
According to a survey carried out by the U.S. Department of Health and Human Services, there’s a 70% likelihood that the average 65-year-old will require some form of lifelong care as they advance in age. This study also discovered that although one-third of 65-year-olds may never require such help, one in every five people in this age-group will require long-term care for over five years. Based on this data, imagine having to pay for long-term care services at an assisted-living facility for more than five years! This is where long-term care insurance comes into play.
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There is a 70% chance the average 65-year-old will require some form of lifelong care.
You can avoid such high expenses by researching cost-effective options such as acquiring the long-term care insurance as early as now. Having the right facts at your disposal makes you better prepared in case a tragedy strikes. In this article, we will explain what long-term care insurance is, make recommendations for the groups of people that need it most, and provide a few tips on how to buy this policy.
What Is Long-Term Care Insurance?
Put simply, the term “long-term care” refers to the assistance offered to an individual with a chronic illness or disability over an extensive period. If you end up being diagnosed with a chronic disease, don’t expect your Medicare or Medigap Insurance policy to pick up the bill. Other programs such as Medicaid have stringent financial requirements, which you’re likely not to qualify for.
But, with long-term care insurance, you can receive all the aid you need from a nursing facility without depleting all your retirement savings. So, just who needs a long-term care insurance policy?
One-third of 65-year-olds may never require such help, one in every five people in this age-group will require long-term care for over five years.
Inflation Protection Option
The purpose of this is to protect your benefits from inflation. The idea here is to increase the benefit amount every year so that it’s not affected by any changes in the economy. Experts recommend choosing an inflation guard that raises your benefits by 5% using the annual compounding method.
Services Covered By Long-Term Care Insurance
Most insurance companies offer these services under the long-term insurance policy:
It’s an institution, which is designed to provide round-the-clock services including rehabilitation, medical services, personal care, and assistance with routine activities. Before purchasing the policy, inquire whether it covers only the room-and-board type of service or a full range of them.
Although most people use the terms “assisted living” and “nursing home” interchangeably, the two are not the same. As previously stated, a nursing home offers supervised care to individuals. In contrast, an assisted living facility is designed to offer support and companionship. The latter constitutes of an array of separate apartments or condos, where seniors or other special groups of people live communally. The services you’re likely to find at an assisted living institution include personal hygiene tasks, cooking, medication management, and housekeeping. Most companies provide assisted living coverage under the long-term care insurance.
Home Care is entirely different from the two services highlighted above. It differs in that an individual is not required to leave their apartment. Instead, the assistance he requires is provided from the comfort of their home. Often, it means hiring a professional caregiver or agency to help with routine chores including grooming, bathing, and housework.
Some insurance policies will also cover the additional costs incurred in making home improvements. This includes installing grab bars, toilet safety rails, ramps, stair lifts just to mention a few.
Future Service Options
At times, a new long-term care service may become available after you’ve already purchased the policy. You should check to see if the long-term care insurance being offered is flexible enough to allow for such adjustments.
There are special public programs such as Medicare and Medicaid, which can help but even then, you’re required to meet certain qualifications before being eligible.
Does the Government Not Pay for Long-Term Care?
Many turn a blind eye to long-term care insurance because they assume that the government will come to their rescue when the time comes. The truth is that the government is not responsible for your long-term care, neither are your children and colleagues.
Yes, there are special public programs such as Medicare and Medicaid, which can help but even then, you’re required to meet certain qualifications before being eligible.
The only time Medicare can pay for your lifelong care is if:
- You need professional services or rehabilitative care in a nursing home for a maximum duration of 100 days.
- You require rehabilitative care at your residence for a brief period.
On the other hand, Medicaid pays for this care only if you’re receiving an income below a specific level and you still have to meet other qualifications.
Choosing a Long-Term Care Insurance Policy
If you have already decided to get long-term care coverage, then you’re just a few steps from achieving this goal. To ensure you get the best coverage, you will need to research thoroughly. First, ask your local state insurance department for a list of all insurance firms that sell this policy. Narrow down your choices by eliminating companies which have received complaints, negative remarks, and poor ratings.
Second, assess the stability of the insurance firm by checking its history with this particular policy. There are numerous sites that provide records of companies’ histories. List the firms that seem to maintain good records.
The next step entails comparing the data and costs from the companies you have narrowed down. At this point, you should have three to four choices to choose from. Checking how often and by how much these companies raise their premiums can go a long way in choosing a great long-term care insurance cover.
After comparing the different firms, print the final policy that you find fit. Review this fine print wisely. You can even consult your financial advisor or attorney to help you understand all the details outlined in the policy. If you have any questions, call the insurer and have a representative answer them to your satisfaction. Do not be in a rush to make a decision.
When it comes to making premiums, you should avoid paying in cash. Also, always ensure that you’re paying to the company’s account and not an individual. The good thing is that most states are mandated by law to give you a 30-day period to assess the insurance policy. If you have any doubts before this time elapses, you can always return the policy and receive a full reimbursement.
With the increasing life expectancy rate, more seniors are finding themselves in situations where they require long-term care. Unfortunately, this service is not covered by most health insurance policies. For this reason, you should enroll for a long-term care insurance policy to cater for such expenses when you retire. Long-term care coverage is essential as it helps to preserve your savings and assets. It also enables you to maintain financial independence while relieving your family from a full-time caregiving job.