Long Term Care Insurance (Do You Really Need It?)

Joseph Meyer
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Why even consider long-term care insurance?

Long-term care insurance is designed to help you out when you can no longer care for yourself or your home because of an illness or injury. The insurance takes care of home care, such as cleaning, as well as personal care, like bathing. It can also cover adult day care and treatment for non-serious conditions like arthritis.

Still, loving, useful long-term insurance is a major exception to the rule of insurance. If you’ve ever watched over your elderly grandparents or parents, you understand the importance of a caring, attentive family ready to step in.

If you have a family, take the time to be there for them and pitch in as much as you can.

What Is Long Term Care (and what does it pay for)?

Long term care insurance (also known as long term care coverage) helps to pay the costs associated with nursing homes, assisted living, and home care. It covers any type of care needed by you, your spouse, or your children. Paid for by insurance companies, long term care insurance enables you to keep your own assets instead of going into debt.

In terms of cost, a policy can cost you a few hundred dollars per month or more for most people. The exact premium you pay depends on the insurance company you choose, the coverage you want, and your overall health status.

But what does that coverage really buy? What does long term care pay for? What will you have to pay for on your own if your coverage doesn’t cover everything you need?

What is long term care?

To put it simply, long term care pays for care that keeps you independent, healthy and living at home. This type of care comes with medical supervision and/or assistance with everyday activities like eating, bathing, getting dressed, and moving around in and out of bed, among others.

Buying Long Term Care Insurance

Long Term Care Insurance (LTC) is a means of providing care for individuals who are incapable of taking care of themselves and require the assistance of a non-family member to meet their daily living needs.

During the initial years, this coverage was almost exclusively sold to groups like state employees and members of large corporations but today, it’s being sold to individuals at a growing pace.

The popularity of Long Term Care Insurance (LTC) can be ascribed to two factors. Firstly, the process of buying an LTC plan is a lot easier than buying other types of insurance (life, disability, etc.) since the plan takes a lot less money and effort to buy. Secondly, legislation at the state level and demographic studies have pointed towards an increase in the number of people whose quality of life will be made worse by the inability to care for themselves. A large undertaking involving many states and a number of government agencies was undertaken to determine the need for an LTC policy. This resulted in the creation of a new law that covers Medicare’s ability to pay for care.

The legislation resulted in a dramatic increase in the number of people who realized how difficult it is to get around and provide yourself with basic care needs as you get older. This increase in awareness resulted in a boom in the sales of LTC policies.

Cost of Long Term Care

Long term care insurance is not the most popular product and in 2016 there were just over 1 million people with long term care insurance coverage. Long term care insurance is not required and is not subsidized by Medicare, so why do people buy long term care insurance? Most people buy it so that their assets will be protected in case they become disabled and need long term care.

As you get older, the costs of long term care insurance goes up. If you are between 45 and 55 years old, your premiums will be much lower than if you are 75 and over.

Keep in mind that long term care insurance benefits are fixed and not inflation adjusted, so the insurance benefits will not increase over time. Over 80% of the individual long term care insurance policies are purchased after age 60. So if you are younger than that, it may not make sense to purchase long term care insurance.

Interestingly, those with employer group long term care insurance coverage are more likely to purchase the long term care insurance out of pocket, while those who receive a salary reduction are far less likely to purchase long term care insurance.

Cost of Care Survey

A New York Times article that used a survey of long-term care prices to conclude that most people would make out better under almost every scenario by declining long-term-care insurance. But a careful read of both the survey and article show that they do not say what the critics claim.

Consider Who Pays For the LTC Policy

Long term care insurance policies are not cheap. You should explore your options carefully before you consider a policy. Carefully weigh the benefits vs. the cost to determine if a LTC policy is really something that is right for you.

Some employers have considered offering long term care insurance as a perk, to help attract employees. However, many people consider long term care insurance premiums to be a very substantial deduction from their paycheck, which deters them from using it.

No matter who is paying for your policy, the “primary beneficiary” that you name will receive the benefits in case of your disability. Once the benefits are issued, you can control the money until you are ready to use it. This means that you get to choose how the money will be used. You can use the money for any expenses that you have during your stay in the long term care facility.

Smaller policy limitations are usually available for people whose income is limited, but you should compare what’s available to determine which policy works best for you.