Long-Term Care Insurance – Factors to Consider

Like all insurance, in purchasing a long term care insurance plan, you’re buying peace of mind for possible future outcomes. Experts suggest that the best time to buy a policy is when you’re young and healthy, as the rates will be lower. But it’s hard to make a decision like this so prior to the need, as it’s impossible to know exactly what your financial or physical well-being future looks like.

Whether you are buying for yourself or for a family member, there are some things to consider when thinking about long term care insurance:

No One-Size-Fits-All Insurance Solutions Available

According to U.S. News and World Report, a long-term care policy won’t cover all situations that aren’t covered by Medicare.

If you break your hip, for example, and need help temporarily, a long-term care policy is unlikely to be useful, since most don’t kick in until you’ve been permanently disabled for 90 days. Most policies sold today limit coverage to a certain number of years or a certain dollar amount.*

One increasingly popular type of insurance policy mixes long-term care insurance with life insurance. Customers pay a lump sum or monthly payments. If they don’t use the policy, their heirs get a payment when they die or they can pull the money out at any time.*

Another option is annuities with long-term care riders. You buy an annuity but rather than taking withdrawals, you earmark the money for long-term care. If you don’t need long-term care, you can elect to receive the money after the annuity matures or let it go to your heirs.

It’s also possible to sell your life insurance policy to get cash for long-term care. If you are being cared for at home, a reverse mortgage is an option. Or you can consider buying into a continuing care community.

Short Term Insurance Policies

Short-term care policies are also available, which have a shorter waiting period but provide care for no more than a year.*

A number of policies permit elders to use a pool of benefit funds for either home care or residential long-term care, rather than only for one or the other. Requirements to qualify for benefits have been loosened somewhat, and policies now routinely permit the policyholder to “step down” to lower levels of coverage, for a lower premium, if continuing to pay for the higher benefits becomes too financially burdensome.**

According to Joseph Matthews, an Attorney writing for NOLO, insurance companies market long-term care insurance by suggesting that consumers are likely to wind up spending years in a nursing facility — a prospect that would wipe out their savings and perhaps leave them without a roof over their heads.

However, the actual odds of a long nursing facility stay are considerably lower than the insurance industry would like you to imagine, and with the protection afforded by Medicaid laws, there is virtually no risk of being thrown out of a nursing facility and into the street.**

Consider these statistics:

• Two-thirds of all men, and one-third of all women, age 65 and older will never spend a day in a nursing facility.

• Most nursing facility stays are brief — only about 10% of men and 25% of women age 65 and older spend more than a year in a nursing facility.

• Only 10% of all nursing facility residents will stay longer than three years.

• More than half of all nursing facility stays last six months or less. The average stay of those who enter a custodial care facility is about 18 to 20 months.

Other considerations include:

• About half of all LTC policies lapsed before any benefits were paid; policy holders were unable or unwilling to continue paying their premiums

• Of those people who bought insurance and later entered a nursing facility, about half never collected a dollar from their LTC policies.

• No benefits were ever paid to the many people who bought nursing facility coverage but instead received home care or entered a residential facility not covered by the insurance.

• When LTC benefits were paid, they were usually far below the actual cost of care.For many of the longest-term residents, benefits were used up before the nursing facility stay ended.**
  
  

Rates for long term care insurance policies for government employees are rising. As a result, rates across the board may begin to rise as well. Statistics can be daunting and confusing, and when it comes to information about health care, finances and aging there is so much to keep in mind.

As with any major financial decision, you should discuss the options for a long term care policy with a financial advisor as part of your retirement planning strategy. It’s important to approach the subject with your specific needs and assets in mind and make sure you do a lot of research.

Remember, like any insurance policy, though it’s presented as a tool to help you, in the end, it’s still a consumer product. You want to find the product that will get you the benefits you need AND secure the right investment landscape for you and your family in the process.

Broad Street can help you navigate these decisions. As an extension of the Broad Street team we work with a larger network of high quality health service providers including elder care attorneys.

Contact us for more information, 847-728-0134.

*US News and World Report, Money, 9 Factors to Consider Before Buying Long Term Insurance.
**Joseph Matthews, NOLO, Long-Term Care Insurance: The Risks and Benefits