The Beginner’s Guide to Long-Term Care Insurance

Many people are misinformed about how they will pay for their long-term care needs. Medicare will pay for some type of skilled care in certain situations, but will not pay for long-term care on a permanent basis. Also, the cost of long-term care can be shocking. For home care, it can cost as much as $15,000-$20,000 a month for 24 hour care. Assisted Living care starts at about $3,500 a month, and then the rate is increased by the amount of care needed. Nursing home care can be anywhere from $4,500 to $10,000 a month. Medicaid can help pay for this type of care, but there are income and asset restrictions. Also, only certain care facilities will accept Medicaid.

For families wanting to have the financial protection from these costs, and the most choices of how and where they receive care, purchasing long-term care insurance may be a good choice for them.

You may wonder if long-term care insurance is a good option for your family: Is it worth the cost? What types of policies are available? Will you even use it? What are the limitations?

Let’s take a look at where you should start.

Insurance Costs

man walking woman in nursing home

Texans could spend as much as $65,000 on long-term care this year.

You may be apprehensive about long-term care insurance because you have heard the costs are steep. Premium amount can vary amongst different companies for a variety of reasons. Your premium cost can be affected by age, health, and the amount of daily/monthly benefits you purchase. Some policyholders spend as little as $250 annually, while others can spend up to $6,000. According to the American Association for Long-Term Care Insurance’s 2012 Long-Term Care Insurance Price Index, an insurance policy of this type could cost a couple in their mid-fifties up to $2,700 annually. The good news is that your insurance may be eligible for an income tax deduction; however, that depends on many factors.

While it is true that the cost of coverage at 50 years of age is typically lower than at 65, premiums have also historically increased over time due to outside factors such as the overall cost of care, and inflation. These outside factors should also be considered when purchasing long-term care insurance. You should ask yourself, “If I have the money to cover the costs today, will I still have that available funding in the future and still be able to accomplish my financial goals?”

Genworth Financial has an interactive guide to the national cost of long-term care to give you a better understanding of how quickly home care, adult day health care, assisted living facilities and nursing home fees add up. This guide can also help you determine how much assistance you will need to plan for.

Policies and Plans

The abundance of policies and plans can seem overwhelming, so typically a policyholder is encouraged to seek the help of someone who specializes in elder law or estate planning in order to assist with the process of purchasing long-term care insurance.

Here are a few of the plans that may be available to you:

  • Individual plans- These plans are a good option if you are no longer employed, or are working for a company that does not offer long-term care insurance. Usually, these plans are purchased through an insurance agent or broker.
  • Joint plans- These plans allow you to purchase a single policy that provides coverage for more than one person. However, sharing benefits can mean that one person can deplete the shared funds.
  • Employer or organization-sponsored plans- Generally, these plans are offered as group policies or discounted individual rates, with benefits available to your family members. You may be able to retain the policy even if you leave the company/organization, or your employer stops offering long-term care insurance.

Here are some common long-term care insurance policies:

  •  Reimbursement policy- With these polices, you have a daily/monthly benefit amount, and are reimbursed for any long-term care expenses that the policy covers up to a set amount. For Example: Your daily benefit is $200. If you receive home care for $175 a day, than you will be paid $175. If you receive nursing home care for $300 a day, than you will be paid $200.
  • Per diem policy- These policies allows you to receive a flat dollar amount per day. Using the same example as above, you will receive a daily benefit of $200 no matter your covered expenses.
  • Life insurance policy- If you are planning on purchasing a life insurance policy, or already have one, comb through the policy and see what your options are. Accelerated living benefits could mean that if you are in need of long-term care, than you can use the death benefits instead of them going to your beneficiary after you pass.

What Will It Cover?

Long-term care policies generally cover skilled care for those with functional/physical impairments who cannot perform activities of daily living (bathing, dressing, toileting, etc.) and for those with cognitive impairments, including dementia and Alzheimer’s disease.

While some insurance companies place provisions on the type of long-term care services or programs you use, most policies will cover the following care expenditures:

  • Nursing home
  • Assisted living facilities
  • Adult day care center services
  • Home care
  • Home modifications
  • Chore and Homemaker services
  • Training for family caregivers
  • Respite Care
  • Long-term care coordinators
  • Alternate plan of care which can allow insurer to cover unforeseen care services
    that had not been developed when the policy was purchased. This is important since the policy can be purchased years before you will actually use it.

You should know that not all cognitive conditions are covered by long-term care insurance. Additionally, care for impairments due to alcoholism, drug abuse or self-inflicted injury is not covered.

Using the Policy

One of the main concerns for this type of insurance policy is, “WilI I actually need to use it?” Only 8 million people in the United States currently have long-term care insurance, possibly due to this concern.

The U.S. Department of Health and Human Services predicts that 70% of people who are 65 years of age or older will need long-term care during their lifetime. Of these people, 40% will be admitted into a nursing home, of which 10% will stay there five years or more.

Remember, long-term insurance isn’t just for the elderly; according to the U.S. Government Accountability Office, out of the 13 million Americans between 18 and 64 years of age, 40% currently receiving some sort of long-term care.

This being said, it is important to point out that most long-term policies will not start paying for care until you have been in a nursing home for more than 90 days. Otherwise, you will not receive benefits.

To put it simply, there is no guarantee that you will not need long-term care insurance someday. The only thing you can control is whether or not you purchase a policy to cover those possible costs.

Start Planning Today

The earlier you begin planning, the more prepared you will be.

An elder law attorney, who specializes in long-term care planning can advise you about ways to plan for future long-term care expenses, and inform you of the benefits of purchasing long-term care insurance.

Contact the elder law attorneys at the Law Offices of Christina Lesher at (713) 529-5900 to get started on your long-term care plan.