As we get older, the more attention and care that we need from health care professionals. There are a lot of people that are going to need even more specialized attention from professionals, either in the form of a nursing home or from an in-home care specialist. While this care is necessary for their health and safety, it can also be extremely expensive.
In fact, long-term care can put a serious strain on your budget or the finances of your loved ones. Using numbers from a Genworth Financial study, a private room in a nursing home averages over $90,000 every year. If you’re looking to have in-home care for yourself or one of your loved ones, you’ll spend almost $50,000 every year. These are conservative numbers, in some cities, you could pay close to double this amount.
It’s easy to see that long-term care can carry a massive bill, but luckily there are several ways to offset the huge costs. One of the most popular ways is to purchase a long-term insurance plan. These plans are offered by hundreds of different insurance companies across the United States, but most people don’t understand what these plans cover and how they can be used to protect your finances.
Long-Term Care Defined
Understanding exactly what falls under long-term care is important, it will change the way that you look at the insurance policy. There are dozens of different services that fall under the umbrella of long-term care.
Long-term care could encompass anything from nursing home residents or adult day care, but there is a loose definition that is used to explain long-term care: It’s any assistance that is needed for over a long period because of a disability or illness.
To qualify for this type of assistance, you will have to receive the certification from your primary physician or another health professional that you visit. The physician will want to ensure that the patient is unable to perform several “activities of daily living,” which are things like cooking, dressing, eating, and other basic tasks that you’re required to do every day.
One of the most common misunderstandings among seniors is that Medicare will cover the costs of long-term care if you ever face any of those expenses, but that isn’t 100% true. This mistake could leave you with thousands of dollars of debt. In fact, with Medicare or Medicaid, it will only pay for a skilled nursing facility after a specific hospital stay, and after that, they only pay for a short period of time.
How Much Does Long-Term Care Insurance Cost?
One of the biggest determining factors that an applicant is going to look at when considering long-term care insurance is the cost. You’ll need to know how much you’ll pay to determine if these policies are worth the cost of the coverage. Several different factors are going to impact how much you’ll pay for long-term care policies.
The major aspect that the insurance company is going to use is your age. The older that you are when you apply for the additional coverage, the more that they are going to charge you for your long-term policy. The logic behind that is simple, the older that you are, the more likely that you’re going to need to use the insurance policy sooner. If you’re younger, the company expects to get many years of premiums before you ever need to cash out on the insurance plan. Of course other factors play a role in the amount of premium you would pay as well, such as if you are seeking insurance coverage and you are a smoker, this could almost double your premium rate. Or if your health is at a point where you could no longer pass the medical exam and you have to take the alternative route of a no medical exam life insurance policy, this will cause the premium to increase as well.
Another significant factor that is used to calculate premiums is the amount of coverage that you want for your policy. There are two main categories for your plan, the amount that the policy will pay every day and the number of years that the plan will pay for. Obviously, the larger your policy size, the more that you’re going to have to pay every month for your plan.
Just like a life insurance plan, long-term care insurance policies are going to require that you go through medical underwriting before they approve you for coverage. The company is going to want to look for any health problems or pre-existing conditions that you have that could make you a higher risk to insure for long-term care. The better your health is, the less that you’ll pay for your coverage. If you have any severe health complications like diabetes or heart complications, they are going to charge you more in your monthly premiums.
In fact, several pre-existing conditions could cause the company to decline you for coverage. Complications like Alzheimer’s disease, Parkinson’s disease or dementia could cause the company to decline your application.
Additional Factors to Consider
Before you purchase one of these plans, there are several unique qualities that you need to take note of, and one of those is how long the policy is going to cover your expenses. Some companies will pay for a pre-determined set amount of years, normally around two to five, while other companies will pay for much longer. This is something that you’ll need to determine before purchasing any coverage.
Another factor to take note of is the requirements that you’ll have to meet before the company will payout for the policy. In most cases, you’ll have to be considered “disabled” or in need of long-term care for a certain amount of time before the coverage will kick in. Make sure that you understand exactly what the insurance company is going to require of you before you get the money from the policy.
The Disadvantages of Long-Term Care Insurance
While long-term care insurance is a great way to protect your savings and your family’s finances, there are some disadvantages to these plans that can harm its usefulness. One of those pitfalls is the cost of these plans. According to the American Association for Long-Term Care Insurance, the average policyholder pays around $2,100 every year for a 60-year-old couple for their plan. This would give the couple $150 every day for long-term care for three years after they start receiving the policy. Because this number is only an average, your policy could be much more affordable depending on your age and health.
Another significant problem is qualifying for the insurance, and the time it can take to receive the payout from the policy. As we mentioned, there are several different conditions that could disqualify you from getting the protection that you need. There is some strenuous underwriting that you may have to go through to get the coverage that you want.
Additionally, the waiting period for the policy payout can be a serious problem for some applicants. The majority of insurance companies won’t pay anything until you’ve been in a nursing home or required the care for at least 90 days, and for some people, that can drain a savings account. You’ll need to ensure that you know how long the waiting period is for your specific policy.
Long-Term Care Insurance – what you need to know
Hopefully, you’ll never need to require long-term care, but if you do, the cost for that specialized care can quickly go through the roof. If you don’t want to drain your savings, or put an additional burden on your family, these policies are a great way to protect yourself.
These policies can be quite expensive, which means you’ll have to weigh the cost versus what you’ll be getting through your plan. There are a lot of situations where a long-term care policy won’t be worth how much you pay for coverage.
There are some different alternatives that you can choose from if you don’t think that the insurance plan is worth how much you pay. One of the easiest ways is to simply save up enough money in a savings account to pay for the long-term care if you were to ever need it. This is one of the simplest ways to pay for any long-term care. You could also purchase an annuity and attached a long-term rider to the annuity.
The annuity will earn money, but the money will be set aside for any long-term care that you need in the future. Because everyone is different, you’ll have to decide which technique is going to work best for you.
It’s vital that you have the insurance policies that you need to protect yourself and your families. It’s impossible for us to say if a long-term policy will fit your needs. If you have any questions about long-term care insurance, please contact one of our agents at 888-229-7522 or fill out the quote form on this page, and we would be happy to answer your questions and ensure that you have the plans that you need.