Font Size:
Overview
Long Term Care
What Long Term Care (LTC) Insurance Is
Why Long Term Care Insurance is Necessary
How Long Term Care Insurance Works
How You Qualify for Long Term Care Insurance Benefits
What You Should Look For In a Long Term Care Policy
Long Term Care Insurance in Your Financial Plan
Is Long Term Care Insurance Right For You?
How Much Long Term Care Insurance Costs
Where You Can Learn More About Long Term Care Insurance
References
What Long Term Care (LTC) Insurance Is It is any insurance policy, or benefit rider, designed to help you pay for your care for at least 12 months (24 months in some States). Coverage is normally provided for medical or personal care services provided in your community in settings such as a Nursing Home, an Assisted Living Facility, or in your own home by Home Health Care professionals.(4)
Most LTC policies sold today are individual health insurance policies, with group insurance coverage available through employers and associations. You can also find LTC benefits in some Life insurance policies as an accelerated benefit.
Why Long Term Care Insurance Is Necessary Today, there are approximately 33 million people eligible for Medicare, most all of whom are over age 65. Approximately 7 million of them need and use long term health care services now. In 5 years this will rise to 9 million.(5)
Between 1946 and 1964, the "baby boom" generation was born --- they number 77 million strong. A baby boomer turns 50 every seven seconds. By the year 2030, all the baby boom generation will have turned 65. Most will spend one-third of their lives in retirement, failing to realize how much long term care services will cost, jeopardizing their retirement security.(5)
Life expectancy is currently at 79 years for women and 72 years for men. In 30 years, over 25% of the American population will be over age 65. At that same time, two-thirds of the age 85+ population will be women who will be twice as likely to need long term health care services.(3)
Today, a one year stay in a Nursing Home can cost up to $45,000 depending on where you live --- in 30 years it is expected to rise to $190,000. The average stay in a Nursing Home is 2.5 years.(1)
Today, a one year stay in an Assisted Living Facility can cost can cost up to $30,000 --- in 30 years it is expected to rise to $120,000. The average stay in an Assisted Living Facility is 2 years.(1)
Today, Home Health Care services can cost up to $30,000 a year, even for part-time care. Two visits a day by a home health aide to assist with bathing, dressing and household chores can cost up to $2500 a month.(1)
Medicare, the government health care program for the aged, generally does not pay for long term care. Medicare does pay for skilled nursing care on a limited basis, in a skilled nursing facility or at home (including home health aide services), but you must meet all of the requirements of Medicare. Medicaid, a government welfare program, pays for nursing home care if you are impoverished, but not usually for assisted living or home care services.(1)
If you are planning on paying for long term care with personal savings or other assets, about one-half of all people needing long term care deplete their savings in about 3 months.(5)
With LTC insurance, you have an alternative that allows you to protect your assets, along with the freedom to choose the care services you need from qualified providers. You then have the choice to use your savings for things other than paying for your long term care.(5)
How Long Term Care Insurance Works
Benefits in most LTC policies today pay you a daily amount for the type of care you receive. Some policies pay your daily expenses up to a fixed daily limit, while others pay a set daily amount regardless of the actual expense you incur.
These daily amounts can be paid over a specific period of time, such as 2, 3 or 5 years, or out of a set amount of benefits, often called a "pool of money".
You can also buy a policy that will pay benefits for an unlimited period of time, for as long as you qualify for benefits, essentially providing you lifetime benefits.
How You Qualify for Long Term Care Insurance Benefits
Most policies allow 3 ways to qualify, often referred to as "benefit triggers": * (4)
What You should Look For In a Long Term Care Policy
Look for a policy that allows you to structure a benefit package that fits your needs. One size does not fit all.
Consider a policy that covers a variety of long term health care settings, and not just care in a Nursing Home. Assisted Living and Home Care benefits are necessary components in a comprehensive LTC policy.
Check out the insurance company --- how long they have been in the LTC insurance business; have they raised their premium rates on their LTC policies; are they financially sound.
Review the policy language carefully --- make sure it is easy to read and understand; are important terms defined clearly; in the end, is it what you wanted.;
Understand the difference between tax qualified and non-tax qualified policies. There are a lot of opinions about the advantages and disadvantages of each type of plan. Ask questions and seek the advice of a personal tax advisor if you need help.
Long Term Care Insurance in Your Financial Plan
LTC insurance is an integral part of a sound financial plan to protect your hard earned assets from the potential for financial ruin that can come from long term health care. It allows you to take personal responsibility and control of your health care needs and lessens your reliability on family and friends for your care needs. Many financial planners believe they have a professional responsibility to recommend that their clients seriously consider LTC insurance, because the risks for needing long term care are significant and the costs of care can be devastating. The bottom line --- plan ahead and be prepared.
Is Long Term Care Insurance Right For You?
Here are some questions you should ask yourself:
Can I qualify for an LTC policy? These insurance plans are usually medically underwritten. A good agent will ask you some questions about your health and medical history to "pre-screen" you to see if you can get a policy. Companies with sound underwriting practices are more likely to have good claims experience and less likely to need to raise your premiums in the future.
Do I have the income or resources to pay for LTC insurance? LTC insurance can be expensive, especially if you wait beyond age 65 to buy a policy. Your premiums will also depend on the benefit package you select. Your agent and the company have an obligation to make sure the policy you want is suitable for you.
Do I want to pass on an inheritance to my loved ones? Asset protection is a prime reason people buy LTC insurance. It avoids spending your estate on long term health care, allowing you to give your children and grandchildren an opportunity to enjoy the life you want for them.
Do I want my children and friends to shoulder the burden of caring for me? Independence is important and so is personal responsibility. LTC insurance can give you both. Children may want to help, but it just may not be possible when they live far away, dealing with jobs and raising their own children. They should not feel obligated to care for you nor should you expect them to. LTC insurance takes the guilt away, and preserves your dignity and independence.
How Much Long Term Care Insurance Costs
Today, many insurers offer private Long Term Care policies. Premiums will vary by the types of benefits purchased, services covered, daily amount and benefit period selected and any elimination period. Premiums may also vary based on sex and geographic location.
The age at which a policy is purchased has a significant impact on cost --- the older you are the more the policy will cost. Purchasing a policy at age 45 will generally cost just half as much as the purchase of a policy at age 65.(1)
Depending on your age at purchase, compound inflation benefits can add up to 60% more to an annual premium. Nonforfeiture benefits can add an additional 20% to an annual premium.(1)
Where You Can Learn More About Long Term Care Insurance
(2)United Seniors Health Cooperative, Private Long Term Care Insurance - To Buy or Not to Buy, Special Report, 2000.
(3)Consumer Digest, The Crisis in Long Term Care, June, 1998.
(4)NAIC Model Regulation for Long Term Care Insurance, 2000.
(5)Stephen A. Moses, Pigs, Pythons and Politics: How to Survive the Aging of the Baby Boomers, Center for Long Term Care Financing, March, 2000.
What Long Term Care (LTC) Insurance Is
Why Long Term Care Insurance is Necessary
How Long Term Care Insurance Works
How You Qualify for Long Term Care Insurance Benefits
What You Should Look For In a Long Term Care Policy
Long Term Care Insurance in Your Financial Plan
Is Long Term Care Insurance Right For You?
How Much Long Term Care Insurance Costs
Where You Can Learn More About Long Term Care Insurance
References
What Long Term Care (LTC) Insurance Is It is any insurance policy, or benefit rider, designed to help you pay for your care for at least 12 months (24 months in some States). Coverage is normally provided for medical or personal care services provided in your community in settings such as a Nursing Home, an Assisted Living Facility, or in your own home by Home Health Care professionals.(4)
Most LTC policies sold today are individual health insurance policies, with group insurance coverage available through employers and associations. You can also find LTC benefits in some Life insurance policies as an accelerated benefit.
Why Long Term Care Insurance Is Necessary Today, there are approximately 33 million people eligible for Medicare, most all of whom are over age 65. Approximately 7 million of them need and use long term health care services now. In 5 years this will rise to 9 million.(5)
Between 1946 and 1964, the "baby boom" generation was born --- they number 77 million strong. A baby boomer turns 50 every seven seconds. By the year 2030, all the baby boom generation will have turned 65. Most will spend one-third of their lives in retirement, failing to realize how much long term care services will cost, jeopardizing their retirement security.(5)
Life expectancy is currently at 79 years for women and 72 years for men. In 30 years, over 25% of the American population will be over age 65. At that same time, two-thirds of the age 85+ population will be women who will be twice as likely to need long term health care services.(3)
Today, a one year stay in a Nursing Home can cost up to $45,000 depending on where you live --- in 30 years it is expected to rise to $190,000. The average stay in a Nursing Home is 2.5 years.(1)
Today, a one year stay in an Assisted Living Facility can cost can cost up to $30,000 --- in 30 years it is expected to rise to $120,000. The average stay in an Assisted Living Facility is 2 years.(1)
Today, Home Health Care services can cost up to $30,000 a year, even for part-time care. Two visits a day by a home health aide to assist with bathing, dressing and household chores can cost up to $2500 a month.(1)
Medicare, the government health care program for the aged, generally does not pay for long term care. Medicare does pay for skilled nursing care on a limited basis, in a skilled nursing facility or at home (including home health aide services), but you must meet all of the requirements of Medicare. Medicaid, a government welfare program, pays for nursing home care if you are impoverished, but not usually for assisted living or home care services.(1)
If you are planning on paying for long term care with personal savings or other assets, about one-half of all people needing long term care deplete their savings in about 3 months.(5)
With LTC insurance, you have an alternative that allows you to protect your assets, along with the freedom to choose the care services you need from qualified providers. You then have the choice to use your savings for things other than paying for your long term care.(5)
How Long Term Care Insurance Works
Benefits in most LTC policies today pay you a daily amount for the type of care you receive. Some policies pay your daily expenses up to a fixed daily limit, while others pay a set daily amount regardless of the actual expense you incur.
These daily amounts can be paid over a specific period of time, such as 2, 3 or 5 years, or out of a set amount of benefits, often called a "pool of money".
You can also buy a policy that will pay benefits for an unlimited period of time, for as long as you qualify for benefits, essentially providing you lifetime benefits.
How You Qualify for Long Term Care Insurance Benefits
Most policies allow 3 ways to qualify, often referred to as "benefit triggers": * (4)
- If your care is medically necessary, as certified by a licensed health care practitioner; or
- If you are unable to perform 2 or more certain Activities of Daily Living (ADLs), such as bathing, eating, dressing, toileting, continence and transferring; or
- If you are cognitively impaired, such as suffering from Alzheimer's Disease or senile dementia.
What You should Look For In a Long Term Care Policy
Look for a policy that allows you to structure a benefit package that fits your needs. One size does not fit all.
Consider a policy that covers a variety of long term health care settings, and not just care in a Nursing Home. Assisted Living and Home Care benefits are necessary components in a comprehensive LTC policy.
Check out the insurance company --- how long they have been in the LTC insurance business; have they raised their premium rates on their LTC policies; are they financially sound.
Review the policy language carefully --- make sure it is easy to read and understand; are important terms defined clearly; in the end, is it what you wanted.;
Understand the difference between tax qualified and non-tax qualified policies. There are a lot of opinions about the advantages and disadvantages of each type of plan. Ask questions and seek the advice of a personal tax advisor if you need help.
Long Term Care Insurance in Your Financial Plan
LTC insurance is an integral part of a sound financial plan to protect your hard earned assets from the potential for financial ruin that can come from long term health care. It allows you to take personal responsibility and control of your health care needs and lessens your reliability on family and friends for your care needs. Many financial planners believe they have a professional responsibility to recommend that their clients seriously consider LTC insurance, because the risks for needing long term care are significant and the costs of care can be devastating. The bottom line --- plan ahead and be prepared.
Is Long Term Care Insurance Right For You?
Here are some questions you should ask yourself:
Can I qualify for an LTC policy? These insurance plans are usually medically underwritten. A good agent will ask you some questions about your health and medical history to "pre-screen" you to see if you can get a policy. Companies with sound underwriting practices are more likely to have good claims experience and less likely to need to raise your premiums in the future.
Do I have the income or resources to pay for LTC insurance? LTC insurance can be expensive, especially if you wait beyond age 65 to buy a policy. Your premiums will also depend on the benefit package you select. Your agent and the company have an obligation to make sure the policy you want is suitable for you.
Do I want to pass on an inheritance to my loved ones? Asset protection is a prime reason people buy LTC insurance. It avoids spending your estate on long term health care, allowing you to give your children and grandchildren an opportunity to enjoy the life you want for them.
Do I want my children and friends to shoulder the burden of caring for me? Independence is important and so is personal responsibility. LTC insurance can give you both. Children may want to help, but it just may not be possible when they live far away, dealing with jobs and raising their own children. They should not feel obligated to care for you nor should you expect them to. LTC insurance takes the guilt away, and preserves your dignity and independence.
How Much Long Term Care Insurance Costs
Today, many insurers offer private Long Term Care policies. Premiums will vary by the types of benefits purchased, services covered, daily amount and benefit period selected and any elimination period. Premiums may also vary based on sex and geographic location.
The age at which a policy is purchased has a significant impact on cost --- the older you are the more the policy will cost. Purchasing a policy at age 45 will generally cost just half as much as the purchase of a policy at age 65.(1)
Depending on your age at purchase, compound inflation benefits can add up to 60% more to an annual premium. Nonforfeiture benefits can add an additional 20% to an annual premium.(1)
Where You Can Learn More About Long Term Care Insurance
- NAIC Shoppers Guide to Long Term Care Insurance --- www.naic.org
- Center for Long Term Care Financing --- www.centerltc.com
- Mr. LTC --- www.mrltc.com
(2)United Seniors Health Cooperative, Private Long Term Care Insurance - To Buy or Not to Buy, Special Report, 2000.
(3)Consumer Digest, The Crisis in Long Term Care, June, 1998.
(4)NAIC Model Regulation for Long Term Care Insurance, 2000.
(5)Stephen A. Moses, Pigs, Pythons and Politics: How to Survive the Aging of the Baby Boomers, Center for Long Term Care Financing, March, 2000.
Equitable Life & Casualty Insurance Company ©
