Ready for a sobering statistic? According to the Census Bureau, by 2030, over 70 million Americans will be age 65 or older. As improvements in health care keep our aging population alive longer than any that preceded it, most of those 70 million people will probably require some type of long-term care and to prepare for that need, it may pay to investigate long-term care insurance.
Long-term care is “full-time rehabilitative and/or ongoing nursing care for patients in need of assistance with the activities of daily living.” Such activities could include simple things like dressing, eating, and bathing and if you or a loved one requires this type of daily attention, long-term care (LTC) insurance will cover some or all of those costs.
Long-term care insurance is understandably aimed at senior adults but could be relevant for anyone with a potentially debilitating illness or injury. Ideally, you would get long-term care insurance before the care is required or before you get so old that premiums become far too expensive, but this is not always possible. Generally, long-term care insurance is recommended for people over the age of 60 (unless they have a chronic disease that could become debilitating).
A good long-term care insurance plan has six important sections:
- The length of the self-insurance period
- The length of time that benefits will be provided
- The daily cost allocation
- Any home care options
- An option to increase coverage if necessary
- Price guarantee option
The length of the self-insurance period
Policies usually require a specified amount of time before coverage begins, known as the self-insurance or elimination period. During that time, the policyholder must pay for all long-term care costs out-of-pocket. Self-insurance periods typically last 20, 30, 60, 90, or 100 days. Policies with the longest self-insurance periods have lower premiums.
The length of time that benefits will be provided
Some policies pay for the rest of the policyholder’s life. Other policies pay benefits until a fixed future date.
- If you choose a policy with lifetime benefits: You’ll likely pay a high premium, but the added security could be worth that extra expense.
- If you choose a policy that expires: You’ll be responsible for paying all long-term care costs from that point forward.
The daily cost allocation
Every policy has parameters limiting the amount the insurance company will provide in benefits per day, known as a daily cost allocation. These amounts usually range from $50–350 per day. Today, the average daily cost for nursing home care is $100, so a policy with $150 of daily cost allocation should cover your needs.
Any home care options
By default, most long-term care policies cover nursing home care, as opposed to care in the insured’s private residence. But many people prefer the home care option. If home care is important to you, make sure your policy provides coverage for it.
An option to increase coverage if necessary
Plans that include a coverage increase option increase the amount of coverage each year to keep pace with the rising costs of healthcare. Since healthcare costs have risen in recent years by 10% or more annually, a coverage increase option could prove to be very valuable over time.
Price guarantee option
The price guarantee option locks in a cost for your policy‘s premiums for a set number of years, such as five years, 10 years, or indefinitely. Try to lock in the cost for as long as possible because with long-term care insurance increasing in popularity, prices are likely to rise.
Long term care insurance isn’t just for old people. Anyone who has a serious, potentially debilitating illness or disease should investigate long term care to see if it is right for their situation.
Photo by mikebaird