Who Needs Long Term Care Insurance?

Although the costs for long term care can vary throughout the country, in general, you can expect to pay anywhere up to $100,000 each year for either yourself or your loved one to be cared for by a professional caregiver. This figure will only rise in the future due to inflation. So unless you are extremely wealthy, you would probably benefit from having some form of long term care insurance to safeguard you against these rising costs.

Surprisingly, long term care is not something that is given only to those aged over 65 in retirement. Whilst it is true that around 50% of 65 year-olds will require some form of assisted living service for at least 2 years, 45% of the people who receive long term care are actually between the ages of 18 and 64.

As you can see by these figures, a large percentage of the population will require, at some stage in their life, to be looked after by another person and this includes both younger and older adults. Considering the high costs involved with receiving such care, it really is a sensible option to insure yourself against such a possibility in the event that one day you require help with activities of daily living.

What Does LTC Insure You For?

Long term care (LTC) insurance (LTCI) is designed to cover certain expenses which are not covered under a standard health insurance policy or other forms of health care such as Medicare and Medicaid. As a result, this form of insurance can be a useful way to close any coverage gaps that you may have in your existing policies which are leaving you exposed to uninsured financial risk.

Generally, a LTC policy will insure you for expenses relating to “activities of daily living”. This can involve any essential activities that a person normally conducts, but is now unable to do so on a temporary or long term basis. Such a person will therefore require the help of an assistant or carer in order to do things such as getting dressed, washing oneself, preparing meals, eating, attending to personal hygiene needs and walking or moving.

Depending on the type of insurance policy that you take out, you will be insured for care that you receive at home, in a nursing home or in any other facility in which you have to pay to be cared for. This care can be provided by a registered nurse, a professional therapist or other types of paid caregivers.

Care For Young Adults

As was mentioned previously, a significant number of individuals who receive LTC are in fact young adults under the age of 64. However, unless you have already taken out a long term care insurance policy, then you will be ineligible to qualify for insurance if you are already being cared for.

This poses quite a difficult dilemma, because as you might imagine, most young adults do not think of taking out insurance for being cared for as that type of insurance is only considered to be necessary for older adults.

In addition, there are likely to be other types of insurance policies such as home insurance, auto insurance and health insurance which they are spending their money on, and so may have little left over to spend on a LTC plan.

Unfortunately, if a young adult does become seriously injured, such as if they are involved in a car accident and require looking after, then not having a LTC plan can leave them in a very difficult financial situation if they have nobody to care for them and so have to pay for a full or part-time caregiver.

Most insurance experts recommend you insure the biggest risks that you are exposed to first, such as your home, your health and your car, and then if you have money left over for other things, that you insure yourself against additional risks such as the need for a caregiver.

However, if you live a lifestyle which puts you at risk of needing long term care, then this is something that could also be considered a big risk to your finances and therefore something that you would benefit from spending money on to insure along with your other primary insurance policies.

When Should You Take Out A LTCI Policy?

When you should get insured with long term care insurance is a difficult question to answer, because it really depends on your current financial situation and your age.

As was mentioned in the last section, if LTC insurance is something that you are interested in having, then it is advisable to get it as soon as you are able to do so because once you start receiving care, it will then be too late to insure yourself for the costs that you incur as a result of being cared for.

However, as a general guideline, if you are under the age of 60 then you should only get insured when you have the money to maintain a LTC policy on top of your existing insurance policies. Make sure though, that you are in fact adequately insured against the major risks in your life, and that your coverage limits are spread equally amongst all your policies.

For most people, the need for LTC insurance can be considered as a secondary policy. This means that it will only be something you sign up for after you have your primary insurance policies such as for your home, health and car.

Those who engage in risky activities on a regular basis however, may consider LTC to be a primary policy, and so should therefore give equal consideration to long term care insurance as they do for their home, health and car.

Generally, around the ages of 40-50 is a good time to start thinking about getting LTC insurance policy.

Over 60 Years Old

People who are aged over 60 are recommended to take out LTC insurance as soon as possible. This is especially true if you are worried about suffering from a degenerative disease which leaves you unable to care for yourself in the future, such as Alzheimer’s disease.

You won’t be able to receive insurance coverage if you are in the early stages of a disease, or if you have already been diagnosed as suffering from a particular illness/disease. However, you can still get insured if you have a family history of susceptibility to a disease which increases the likelihood of you requiring assistance with activities of daily living sometime in the future.

One thing that is worth bearing in mind however, is that the cost of taking out a long term care insurance policy will generally be lower the younger you are and the better your level of health is. In addition, cost can also be influenced by how much care you think that you will require. If you think that you will need to be cared for every day all day for example, then this is going to be a lot more expensive than receiving occasional or part-time care.

Note: LTC is not considered to be a form of medical treatment and so it is not covered under health insurance.

Choosing A Good Long Term Care Insurance Policy

Not all long term care insurance polices are created equal, and as a result, there are many different variants which you can choose from that will provide you with differing levels of coverage.

What type of coverage you choose to take out will ultimately be based upon the type of caregiving and duration of caregiving that you think you will need.

There are however, a few things worth bearing in mind when selecting your policy conditions. These include your coverage limit, your deductible limit and the overall cost of being insured.

1 – Coverage Limit

Your coverage limit is the maximum amount of expenses that you will be insured for. The higher your coverage limit is, the better the level of care that you will be able to pay for and the longer that you will be able to keep on receiving it. In addition, a high coverage limit will also reduce the amount of uninsured risk that you are exposed to, which means that you will experience less out of pocket costs.

All of these benefits however, come at the expense of higher premiums, which results in a higher lifetime cost to maintain your policy. The best policy is therefore one that provides you with an adequate level of coverage, but at the same time, is one that you can afford to keep running alongside your other insurance policies.

Coverage limits can be offered on a total or daily basis, and both have their advantages and disadvantages.

Total Limit Policy

With a total coverage limit policy, you will be insured for your total care costs. This is usually a good option if you think that you may require care throughout the majority of the day, as a total coverage limit will be able to cover this large expense.

However, whilst this may result in you receiving better quality care as a result of your needs being seen to throughout the whole day, it also puts you at risk of your insurance coverage running out sooner. This means that any more care you receive after your coverage runs out, you will have to pay for by yourself.

Per Day Limit Policy

A per day limit policy limits the amount of expenses that you are insured for per day that you receive care. The main advantage of having this type of policy is that it will usually last longer than if you had a total limit policy, and so you can be cared for on a much longer term basis.

The downside however, is that you will only be insured for a certain amount of money each day. This means that if you require looking after all day, then you will most likely end up with large out of pocket losses because you will be uninsured for the total cost of the daily care provided by your caregiver.

A per day limit policy may therefore not be suitable for those who require all day assistance, such as older adults with dementia for example. As a result, a per day limit policy tends to be more suited for younger adults who will only require the help of a caregiver for certain periods of the day, such as when they are eating, bathing or getting dressed.

Types Of Expenses That You Are Insured For

Associated with your coverage limit are the types of expenses or type of care that you are insured for. When you sign up for any policy, you should therefore be absolutely clear on what exactly your insurer is insuring you for, what specific dollar limits are set for different types of care or expenses and what is specifically excluded from your policy.

Being aware of such details will also be of use in helping to close any coverage gaps that are leaving you exposed uninsured losses.

2 – Deductibles

Deductibles refer to the amount of money that you must pay before your insurance company starts to pay out for any expenses that you have incurred. Usually, you will find that the higher your deductible limit is, the lower your premium rates will be.

A high deductible is therefore one way in which you can receive a high level of coverage at an affordable price. This however, is usually only a viable option for those who already have money saved in the bank, as that money will be required to cover their deductible amount.

So your best option is to get as high a deductible as you can afford, as this will help to reduce your lifetime insurance costs.

3 – Overall Cost Of Being Insured

The overall cost of maintaining an insurance policy is something that is very important to consider when signing up with any insurer. As was just mentioned, deductibles are one way to reduce policy costs, but another way that is often overlooked is having an agreement in your policy as to how much your insurance costs are allowed to increase over time.

At a minimum, you should look for a policy that offers you inflation protection, so that your insurance coverage will be able to keep up with inflation and the rising medical costs each year.

It is also very beneficial if you can form an agreement on the limit that your premiums are allowed to rise to, or at least the rate at which they can rise over time. Doing so will help you to avoid your insurance costs spiralling out of control, and then being unable to afford to keep your policy and putting you at risk of losing your coverage.

You may also want to inquire about paying an annual premium rather than a monthly premium, as this can be another way to save money and reduce your overall policy costs.

Finally, it is important to note that some policies will not insure you until you have been receiving care for a period of 60-120 days, after which, your insurance will then start to take effect. This is called the “waiting period”.

If this is too long of a waiting period for you, be sure to look for alternative policies which offer lower waiting periods. Bear in mind though, that longer waiting periods will generally result in lower costs, and these costs will rise the shorter your waiting period becomes.

The reason for this is that from your insurers perspective, the shorter your waiting period is the more likely they will be to pay for your expenses. The longer your waiting period is, the less likely they are to pay for your expenses and the less they will pay overall. So the more risk that your insurer perceives, the higher your own costs will be.

Who Doesn’t Need Long Term Care Insurance?

There are three main groups of people who do not require long term care insurance.

The first are those who are wealthy and have a lot of money saved up. They can afford to pay for their care, and still have money left over for other things.

The second group is those who qualify for the federal Medicaid program, as this will pay for long term care costs if you live at or near poverty levels.

The third group is a mixture of those above. They have some amount of money that they are willing to spend on a long term caregiver until their funds run out, after which, their caregiving will be paid for by Medicaid.

Who Does Need To Be Insured For LTC?

Anyone who does not fit into the three groups given above may need long term care insurance. Some possible reasons for this are:

• You have money saved up that you would like to pass on to your children or a charity, and so you don’t want long term care costs to use this inheritance up.

• You have a reasonable amount of money saved up, but don’t want to spend it all on long term care so that you can have money available to spend and enjoy yourself with.

• You want some choice as to where you are given care, so that you can pick your own nursing home or assisted living community. Medicaid usually only allows you to stay in preselected nursing homes.

• People who want to receive professional care, rather than putting the burden on their family.

• People who have a family history of disease, dementia or other mental health problems.

• Individuals whose profession puts them at risk of suffering from long term disability or disease.

If you feel that you or a loved one requires long term care, then it is important to understand what a big financial commitment it is and that it is a financial risk that you should definitely insure yourself against.

In general, the sooner you buy long term care insurance the less expensive it will be. If however, you postpone getting this insurance until you are close to needing it, the costs will be substantially higher. That is the nature of the insurance business, the greater the risk, the higher the cost.