Combine the fact that most of us--about 70 percent, according to some sources--are going to have to make use of long-term care at some point in our lives with the fact that the type of insurance most often associated with it can cover many different health-care settings and solutions and you've got a situation that begs a lot of questions.
Thankfully, you should be able to find answers to a lot of those burning questions below.
Q: What is long-term care insurance?
A: Basically, it’s an insurance product that helps you pay for some or all—depending on the policy you purchase—of the costs related to long-term care.
In other words, it can help you deal with chronic conditions, illnesses, and disabilities—and the expenses that come along with them--over an extended period of time.
Sometimes that means covering some or all of the costs tied to adult day health care, home health care, or hospice care, while at other times it may mean covering the costs of care in a skilled-nursing or assisted-living community.
Q: If I buy this kind of insurance, will it cover all of my long-term care needs, or just some of them?
A: It depends on the policy you purchase. Some policies cover a wide range of services and situations, while others are much more focused in their coverage.
One question related to all of this that you should ask yourself before you agree to buy a particular policy: am I willing to accept some of the financial risk and responsibility should I end up needing some sort of long-term care?
If you are, you should be able to save money by buying a policy with a lower daily or monthly benefit, a shorter benefit period, or longer elimination period.
Q: I've heard that long-term care insurance is expensive. Is that true?
A: It definitely can be. As is often the case with insurance products, though, it depends on what kind of policy you buy.
Also, if you're fairly young and healthy, or if you don't think you'll need much long-term care for some other reason, you'll probably pay a lot less for one of these policies than someone who is older, has health issues, or has a stronger need for extended care.
Q: How much should I expect to pay for a long-term care insurance policy?
A: According to the 2015 Long Term Care Insurance Price Index, published by the American Association for Long-Term Care Insurance, a healthy 55-year-old man should expect to pay approximately $1,060 per year for $164,000 worth of benefits.
A single, 55-year-old woman looking for the same coverage, on the other hand, can expect to pay about $1,390 per year.
Finally, a married couple made up of two 60-year-olds should plan on paying somewhere in the ballpark of $2,220 each year for coverage totaling around $328,000.
Don't take this information to be gospel, though, as rates tend to differ wildly from company to company. So, take your time, shop around, and field long-term care insurance quotes from a number of providers before settling on a particular policy.
Q: Do I have to worry about pre-existing conditions when it comes to buying this kind of insurance, or when it comes to receiving benefits from it?
A: Possibly. It isn't unusual for insurance companies to deny coverage to people with certain pre-existing conditions. It also isn't usual for providers to refuse to pay for care that's related to certain pre-existing conditions until some amount of time has passed.
As a result, read the fine print of any long-term care insurance policy you're thinking of buying, and ask your agent, broker, or financial planner plenty of questions if you're still confused after you review the paperwork.
Also, this definitely is one of those instances when being turned down by one company doesn't necessarily mean you'll be turned down by another, so don't shy away from reaching out to a handful of them for long-term care insurance quotes.
Q: How old should I be when I buy this kind of insurance?
A: Most experts suggest that it's best to purchase long-term care insurance during the period between your mid-50s and mid-60s.
You're free to buy it when you're younger than that, of course, but doing so may not make the most financial sense for you or your loved ones.
Q: What determines how much I'm going to pay for a long-term care insurance policy?
A: In general, your premium payments will be based on your age, your health, and the kinds and amounts of protection you choose when you apply.
Q: Can I expect my premium to stay the same over the years, or will it increase?
A: You definitely shouldn't expect that your premiums will stay the same forever. That also doesn't mean, though, that they will dramatically increase over time.
Your best bet here is to accept that even if your particular policy is "guaranteed renewable," what you pay for that policy could very well increase at some point down the road.
Q: How can I reduce the amount of money I spend on long-term care insurance?
A: A few possibilities: go with a shorter benefit period (the number of months or years you can receive benefits), or a longer elimination period--which is the waiting period you have to endure before your coverage kicks in. (This period lasts somewhere between 30 and 90 days for most people.)
Two other options: consider reducing your daily or monthly benefit—the amount your policy will pay per day or month once you've triggered your benefits--or consider purchasing a shared policy. (More information on shared policies can be found below.)
Q: Why shouldn't I rely on Medicare, or Medicaid, instead of long-term care insurance?
A: Medicare shouldn't be considered an acceptable alternative because it doesn't cover most of the costs related to long-term care. It doesn't cover assisted living or the on-going use of a home health aide, nor does it cover extended stays in skilled-nursing communities ("nursing homes").
Medicaid, on the other hand, is a much more acceptable alternative to long-term care insurance—if you're eligible for it. And to be eligible for it, you have to be below certain financial and health thresholds. This is why you may have heard of people "spending down"—using up their assets—in order to qualify for Medicaid's assistance.
Q: I've heard of something called a shared policy. What is it?
A: Shared policies--or shared care policies, as they're sometimes called—allow you and your spouse, partner, or adult relative to pool benefits that can be divided between the two of you. As an example, a three-year policy will provide you and your spouse, partner, or relative with six years of coverage. If they use just two years of it, you will be able to use the remaining four.
Although shared policies tend to cost more than traditional long-term care insurance policies, they also may provide you and your loved one with more coverage for less money than you would spend on separate policies. At the very least, they allow you to buy a shorter policy than you may buy otherwise.
Q: How about hybrid policies? What are those?
A: Hybrid policies, which are becoming increasingly popular among consumers, combine long-term care coverage with other forms of insurance. Specifically, they usually combine long-term care coverage with universal life insurance or fixed annuities.
One of the benefits of a hybrid policy is that if you pass away without using up all of your long-term care coverage, your heirs will be given a partial refund of your premiums.
Another benefit relates only to women, as some of them will pay less for a hybrid policy than they would for a traditional long-term care insurance policy.
Q: I've heard that life insurance can be used to pay for long-term care. Is that true?
A: Yes, it is. Specifically, you can use a life-insurance policy to help pay for the expenses related to long-term care by taking advantage of the following options:
- Accelerated Death Benefits—this feature allows you, under specific circumstances, to receive an advance on your life-insurance policy's "death benefit" while you're still alive
- Life settlements—this option allows you to sell your life-insurance policy for its current value, although it's usually limited to people over a certain age (70 for men, 74 for women)
- Viatical settlements—this situation also lets you sell your policy, although this time you're selling it to a third party and have to be terminally ill to take advantage of it
Q: Are there any other options I could consider aside from long-term care insurance and life insurance?
A: Without going into too much detail about any of them, you could think about buying and using one of the hybrid policies mentioned earlier, or you could look into disability insurance, some annuities, or even reverse mortgages.
Q: I have adult children who are willing to take care of me if necessary. Does that mean I can ignore this type of insurance?
A: I don't think anyone would say your living situation should cause you to "ignore" long-term care insurance. That said, it may allow you to ignore certain aspects of it. For example, you could focus your attention on policies—or policy options—that focus on paying for skilled-nursing community stays rather than in-home care assistance, which should help you save money.
Q: Where can I buy long-term care insurance?
A: Most people buy this kind of insurance through an agent, broker, or financial planner.
A couple of other options you may want to consider, though, are your employer or an organization or association you're a member of, as it isn't unusual for any of these entities to offer group long-term care insurance policies.
You also could see if you're eligible for a State Partnership Program policy (assuming they're offered where you live).
To learn more about all of these options, read our "Long-Term Care Insurance Basics" article.
Q: How do I know if the insurance company or insurance agent I'm dealing with is reputable?
A: First, check to see if the person--and company--you're considering buying a policy from is licensed to sell this kind of insurance. (You can figure this out by contacting your state's Department of Insurance.) Second, ask them if they've received any training related to long-term care insurance.
After that, you could ask the agent, broker, or financial planner in question if how many different kinds of long-term care insurance policies they sell as well as how many they tend to sell each year. Their answer to this last question should be especially enlightening, as it will help you see how expert (or not) they are in this particular area.
- Ask the LTC Answer Guy
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