Let’s discuss what it means to have long term care insurance. Perhaps you’ve discussed this topic with a trusted advisor as part of your retirement planning. Things change, so now may be a good time to revisit the topic or take an indepth look for the first time. There are many potential benefits and with technological advancements like driverless cars on the horizon, making it easier for individuals to stay in their homes longer, reassessing LTC insurance now feels more relevant than ever.
What Does Long Term Care Insurance Cover?
LTC insurance is designed to help cover the costs associated with long-term care services, which are often not covered by regular health insurance or Medicare. These services can be essential for individuals who require assistance with daily activities due to chronic illness, disability, or aging.
Common Services Covered by LTC Insurance:
- Adult Living Facilities: This includes expenses for residency in nursing homes, assisted living facilities, and adult day care centers.
- At-Home Care: Policies typically cover services provided by home health aides, personal care attendants, and visiting nurses who assist with daily activities like bathing, dressing, and meal preparation.
- Nursing Care: Skilled nursing care, involving medical monitoring and treatments, is usually covered, whether provided at home or in a facility.
- Therapy Services: Physical, occupational, and speech therapy services may also be included.
When is the Right Time to Start Coverage?
Deciding when to purchase LTC insurance can be challenging. Generally, the younger and healthier you are, the lower the premiums. Most experts recommend considering LTC insurance in your 50s or early 60s. Waiting until health issues arise can make premiums prohibitively expensive or even lead to denial of coverage.
Different Coverage Options
LTC insurance policies vary widely, so it is crucial to understand the different options available to find one that suits your needs.
Types of Coverage:
- Traditional LTC Insurance: Provides set benefits for specific services, usually with a cap on the daily or monthly benefit amount and an overall policy limit.
- Hybrid Policies: Combine LTC insurance with life insurance or an annuity. The advantage is that if you do not end up needing long-term care, your beneficiaries may receive a death benefit.
- Indemnity Policies: Pay a fixed benefit amount regardless of the actual cost of the services you receive.
Key Considerations:
- Benefit Period: The length of time the policy will pay benefits, which can range from a few years to a lifetime.
- Waiting Period: Also known as the elimination period, this is the time you must wait before the policy starts paying benefits after a claim is made.
- Inflation Protection: An optional feature that increases your benefits over time to keep up with the rising cost of care.
Cost of Long Term Care Insurance
The cost of LTC insurance varies based on several factors, including age, health, the level of coverage, and the length of the benefit period. On average, annual premiums can range from $2,000 to $4,000 for a 55-year-old individual purchasing a comprehensive policy.
Factors Influencing Cost:
- Age and Health: Younger, healthier individuals pay lower premiums.
- Coverage Amount: Higher daily benefits and longer benefit periods increase premiums.
- Optional Features: Adding features like inflation protection will raise the cost.
Overlap with Long Term Disability Insurance
t is essential to understand the distinction between Long Term Care insurance and Long Term Disability (LTD) insurance, as they serve different purposes:
- LTC Insurance: Covers the cost of long-term care services when you need help with daily activities due to aging, illness, or disability.
- LTD Insurance: Provides income replacement if you become unable to work due to a disability.
While there is no direct overlap between the two, having both can provide comprehensive protection—LTD insurance ensures income continuation, while LTC insurance covers care expenses.
Conclusion
Investing in Long Term Care insurance can offer peace of mind and financial security as you age. Understanding what it covers, when to start, the different options available, and the costs involved will help you make an informed decision.
Common Cent$ Tips:
Make long term care part of your overall financial strategy. Talk with your financial advisor to determine if you should consider LTC and the type of policy that would make sense. You may just need a basic policy and use your other financial resources to cover the difference or find that you have an alternative plan to meet your needs that won’t require the investment of a policy.