Navigating the Future with Long-Term Care Insurance

Most people want to grow old in the comfort of their own home, independent as long as possible. But the reality is many of us will need some form of assistance or care as we age. The United States Department of Health and Human Services estimates that 70% of adults who live to age 65 will need some form of long-term services and support in their lifetimes, and half will need some form of paid care.

When that time comes, do you have a plan for how you’ll pay for it? Medicare only covers a very limited and specific amount of home care. Medicaid does not apply until you have “spent down” a certain amount of your financial assets. If you’ve worked hard to build a financial legacy, you’ll likely want to plan for the very likely possibility of needing care as you age. That’s where long-term care insurance comes in. Here’s what you need to know.

What Is Long-Term Care Insurance?

Long-term care (LTC) insurance is a type of insurance designed to cover the costs associated with long-term care services, which are often not covered by traditional health insurance or government health programs like Medicare. Long-term care refers to a range of services and supports one may need to meet personal care needs over an extended period. While benefits will differ by policy, here’s a detailed look at what long-term care insurance entails:

Coverage for Various Services — LTC insurance typically covers services like in-home care (e.g., assistance with daily activities like bathing, dressing, and eating), nursing home care, assisted living facilities, adult day centers, and sometimes modifications to your home to accommodate disabilities.

Duration and Amount of Coverage — The coverage usually has a defined period (such as two years, five years, or lifetime coverage) and a daily or monthly benefit limit.

Eligibility for Benefits — Benefits are generally triggered when the insured person is unable to perform a certain number of activities of daily living (ADLs)–such as bathing, dressing, eating, etc.–or has a cognitive impairment like Alzheimer’s disease. After the benefit trigger, long-term care insurance policies have an elimination period during which you’ll first be required to pay out of pocket.

Types of Policies — There are different types of LTC insurance policies, including traditional long-term care policies, hybrid policies (combining life insurance with long-term care benefits), and short-term care policies.

Premiums — Premiums vary based on age, health status, the amount of coverage you get, and the length of the benefit period. Generally, premiums are lower when purchased at a younger age. Insurance companies can and often do increase premiums each year.

Importance of Long-Term Care Insurance

Financial Protection — It helps protect an individual’s savings and assets from the high costs of long-term care, which can be very expensive and are not typically covered by Medicare or standard health insurance policies.

Flexibility and Independence — Long-term care insurance provides more choices for the type of care and where it’s received (e.g., at home versus a facility).

Peace of Mind — It offers peace of mind knowing that care needs will be met without overly burdening family members or draining financial assets.

Who Should Consider LTC Insurance – And When?

People who do not own homes and have few assets will likely qualify for Medicaid when they need long-term care. Long-term care insurance is particularly important for individuals who are concerned about preserving their assets and independence as they age. It is also a good fit for people without family members who might provide care.

Generally, it’s best to purchase an LTC insurance policy before you have any major health issues. Your premiums will be more affordable and you are more likely to qualify for coverage. That may mean enrolling when you’re in your 50s or 60s, or later if you are in good health. On the other hand, the younger you start a policy, the more you will pay in premiums over time.

If you are considering long-term care insurance, a financial advisor or care manager can help you decide if it’s a good idea for you or your parent and help you fully understand the benefits and details of the policy.