Our population is aging, no question about the statistics!
Most are aging in place with their medical and caregiving needs met by family members or paid caregivers.
How will your senior face their long term care health and daily living needs on a fixed income?
Some have planned ahead and purchased long term care insurance (LTCI) policies. It is estimated that some 10 million people have purchased these policies already.
Some seniors facing retirement continue to seek it out as a way to provide for their future needs so that they can remain in their homes to age in place.
But is long term care insurance a good idea now?
Long Term Care Needs
What will our seniors need as they age?
Long term care expenses are not only for seniors who enter a facility but also other medical needs and in-home care.
50% of LTCI claims pay for in-home care. Most seniors will need care in their home and LTCI will help them pay those expenses.
Most of these long term health expenses are not covered by insurance such as Medicare, supplemental plans or employer insurance. In fact, Medicare coverage for long term expenses is very limited.
You don’t have a crystal ball to know what might be needed, but a little informed forecasting will help determine how much or if a LTCI policy is a good idea for your senior loved one.
Long Term Care Insurance – Yes or No?
With opinions galore it is tough to sort through everything to find out if it is a good buy for you or your loved one. How can you decide?
Whether it is desired or not, many Americans will spend at least some time in a long term care or rehabilitation facility, whether by choice or out of need.
Innumerable others will need medical equipment or paid caregivers in the home in the future and maybe more than once as their medical needs change over the years.
The cost of good care is only rising.
It would seem to make long term care insurance a good — if pricey — purchase.
As with many things, though, things aren’t always as they seem.
In looking at the decision regarding long term care insurance, the customer population falls into three broad categories:
- those who have little in the way of income and financial assets
- those who have a great deal of income and/or financial assets
- those who fall in between
While the insurance is being marketed to everyone, only people in one of those categories probably ought to be giving it strong consideration.
Not a Good Buy for Everyone
According to the American Association for Long Term Care Insurance, in 2012, a 55-year-old couple purchasing long-term care insurance protection can expect to pay $2,700-per-year (combined) for about $340,000 of current benefits which will grow to over $700,000 of combined coverage when the couple turns age 80.
Those with little in the way of finances probably don’t have a real option to purchase long term care insurance because their limited financial resources are needed to meet their current living expenses with no assets leftover to pay for LTCI.
These are also the people who are candidates for government provided insurance to cover the cost of long term care needs, at least to the extent government will.
The portion of the population with significant financial assets probably are also not the best candidates for long term care insurance. Those who fit in this category have the resources to pay for the care they want without exhausting their bank accounts. They are likely to want more expensive and perhaps extensive care than is covered by the typical long term care policy.
In addition, they are also more likely to stay at home and bring in caregivers, being able to afford the comforts they desire.
The majority of older adults who might want to consider long term care insurance fall between those two categories.
Prime Candidates for Long Term Care Insurance
What makes someone a prime candidate for LTCI?
People with too much in the way of financial assets to qualify for government insurance, but not enough to pay for their own care and still have left over what they need to meet other goals, are prime candidates for the insurance.
They might have enough to pay for a short stay but not enough to pay for a year or three, which is what the “typical” person might need.
Long term care insurance for this group is as much as anything protection against being bankrupted by the need for care and becoming a financial burden on loved ones rather than being able to leave something in an estate.
What Your Senior Should Know
The American Association for LTCI states “when you factor in discounts available to couples, good health discounts and some of the lower-cost inflation options, long-term care insurance can be far more affordable than many people think.”
Each insurance provider sets rates differently and their costs vary widely.
Many companies offer discounts and base costs on a variety of factors including health, current medical conditions, medication lists, smoking, how much coverage your senior desires and even age.
Where your senior lives can also affect their rates as states vary in healthcare costs.
LTCI insurance costs may be able to be included in your senior’s tax deductions if filing a long form.
There are different levels of LTCI based on coverage options not a one size fits all policy, so be sure you are getting quoted the policy that is right for your senior.
LTCI policies often have a cap of what they will pay out over time. Be aware of what your senior’s cap amount is and if that is adequate (or excessive) for their needs.
Good coverage may be enough, excellent coverage may be out of your price range, but some coverage if affordable is better than none!
Some companies may provide an option that allows your senior to increase their coverage for future needs — called a future purchase option. This will not require more medical clearances but it costly.
Start Planning Early
It is a good idea to start the process of planning for long term health needs early, age 50-60, because your senior will need to ‘health qualify’ for any desired coverage. That means, the insurer will determine if they choose to insure your senior based on his or her current health status.
Thus, getting insurance later on once medical complications begin may be next to impossible or extremely costly, if available at all. Rejections for coverage are not uncommon.
When considering LTCI, remember this saying “when it comes to long-term care insurance, your money pays for it … but your health buys it!“
If your senior does get LTCI, the benefit will come to them only if they use it. Many seniors either forget they have coverage, their caregivers are unaware of the policy, or they have difficulty making and getting paid from a claim. Paying out of pocket for insurance that is not used especially when needed, isn’t helping seniors or their caregivers.
Regularly reviewing their policy to learn what is covered and how to make claims will be very important for family caregivers. Here is a great article that can help you and your senior get the most benefit from their LTCI policy.