Whether you are an adult child, a spouse, close friend, or a family member chances are there might come a time when you will have to consider long-term care for an aging loved one.
Depending on your loved one's needs, long-term care (LTC) can come in many different forms ranging from assisted living to an at-home service agency, like Home by Choice. Whichever they require, these services can become expensive and—if not properly prepared—can have a serious effect on their budget. When the time comes, long-term care insurance might provide the exact solution your loved one needs.
Here's what you should know to help your loved one make an informed decision.
Long-term care insurance isn't like traditional health insurance. The purpose of long-term care insurance is to cover expenses associated with long-term senior care services and support.
A long-term care insurance policy reimburses the policyholder a daily amount to cover the cost of skilled nursing care, therapy, and/or services used to assist them with the activities of daily living.
While it was introduced in the 1980's as nursing home insurance, long-term care insurance can protect your loved one whether the care is provided at home, in a skilled nursing facility, or any other senior care setting.
In many cases, long-term care insurance is more for "peace of mind" than it is a solid financial investment. For this reason, it is important to help your loved one navigate the pros/cons of this type of insurance to determine whether it is the right decision for them. Here are a few to consider:
The National Association of Insurance Commissioners estimates that 70 percent of people over the age of 65 will require some type of long-term care at least once in their lifetime. That said, even if you have an aging loved one who is currently in good health, don't fail to plan for the chance that they may require additional assistance in the future.
Determining whether or not your loved one should purchase long-term care insurance is often a question of their income, assets, and retirement goals. If their only income source in retirement is Social Security, it is likely they will qualify for medicare/medicaid and will not require additional LTC coverage. However, if they have sufficient income/assets and don't want to be burdened by paying out of pocket for elder care, LTC insurance may be a wise decision.
Once you and your loved one have determined that LTC insurance is the right choice, the most difficult decision is how to structure your policy. You wouldn't want to pay for something you never use or have it expire too early, only to need it in the future. It is for this reason we recommend speaking to a knowledgeable and understanding insurance agent to help you make the choice.
Every policy is different so we can't stress enough the need to work with a licensed insurance agent to make an informed decision. In general, however, long term care insurance can help pay for:
Be sure to know the right questions to ask when applying for benefits. Some important questions you may wish to address with your agent would be the daily benefit amount the coverage provides, how many years your loved one can claim benefits, and whether the policy provides any protection against inflation.
It is also worth noting that if your loved one has a current health issue or pre-existing condition it may disqualify them from getting LTC insurance. However, underwriting standards are constantly changing and a licensed professional can help you navigate this process.
While many factors affect the cost of your insurance policy, according to the American Association for Long Term Insurance the industry average for long-term care coverage is just over $2000/yr (policy with a daily benefit of $150). While this type of insurance is indeed costly, and may be out of the reach of many Americans on a fixed income, it is important to weight it against the costs of care if your loved one had to pay out of pocket.
According to Genworth's Cost of Care Survey, the average costs for 2018 for common elder care services were as follows:
Additionally, if your loved one decides they want insurance, it is wise to start looking early. Getting insurance in your 50's or 60's can be significantly less costly than choosing to do it after 65. For instance, initial premiums were found to be 8 to 10 percent higher on average for new customers at age 65 than for those who are 64.
Don't be afraid to shop around for the best deal, many agents offer policies from multiple companies and can give you a range of options.
While not exhaustive, we hope this introduction to long-term care insurance has at least given you some food for thought. Like any insurance policy long-term care insurance has its benefits and challenges and we would love to be a resource to help you navigate this important decision.
If you have any questions about LTC insurance or in-home care in general, please feel free to contact us. We'd love to hear from you.