If you’ve had the personal experience of witnessing your mother or father spend their life saving on care in their old age, you understand the purpose of investing in Long Term Care (LTC) insurance.
Long term care insurance policies were made to put you in control, by helping to protect your assets and to ensure that you receive quality care in the setting you want, when you need it most.
Due to the fact that 55% of adults end up needing assistance with their activities of daily living (ADLs) later in life, the decision to obtain Long-Term Care (LTC) insurance makes logical sense. In addition, today’s social and economic changes have made it much more difficult for family and close friends to solely carry this burden alone. Instead, share the responsibility with in-home care agencies or care facilities.
Reasons Why People Buy LTC Insurance
- It provides access to quality care – The ability to select a quality facility, within the location of your own choosing.
- Less Burden – Do not want to be an emotional or financial burden to others.
- Protection of personal assets – Preservation of personal assets for inheritance to children, for a healthy spouse or donation to the charity of your choice.
- Reluctance to welfare (Medicaid) – Do not want to be fully dependent on the government for care.
- Maintain control & independence – Desire to maintain personal control in the choices you make.
- Peace of mind – Knowledge that you will be protected and taken care of, instead of worrying about what could happen.
How Much Does LTC Insurance Cost?
Every State has unique requirements, and each person’s situation is different. Therefore, the only way to know exactly what your individual options and premium costs are, is to get a quote from an advisor.
That said, premiums are determined based on your age, and two main benefit factors:
- Benefit amount and
- Benefit term.
As with other health insurance plans, you may have to pay a higher premium if you have certain health problems. Generally speaking, LTC benefits range from $50 to $400 per day ($1,500 – $12,500/month) and benefit terms from 2 to 6 years. Some companies out there offer unlimited or lifetime benefits.
Should you choose to purchase a lifetime or unlimited policy, you will receive benefits for life. However, most people do not need to insure for an unlimited period of time. Unless you have a history of Alzheimer’s disease in your family, or other health issues that require a long period of care. If you buy a plan with anything less than unlimited/lifetime benefits, you will have a certain amount of insurance money available for benefits when you need it.
How To Determine My General Cost For LTC Insurance?
For example, the annual premium for an average 50-year-old male with a benefit term of 3 years and about a $5,000/monthly benefit, is about $2,400. As such, a $6,000/monthly benefit premium would be about $2,880. This $2,400 annual premium will provide you with an insured “pot of money” of approximately $180,000 (36 months X $5,000).
While you are under the age of 65, you would want a compound benefit increase, which would double to $360,761 (or $10,000 per month) in 14.5 years. Long-term care insurance is considered an investment, due to the fact that it is almost certain you will need long term care in your old age.
What Does LTC Insurance Cover? How Does LTC Insurance Work?
Generally, LTC insurance policies cover you in the event that you need the services of an assisted living facility, skilled nursing home, home healthcare agency or non-medical in-home care agency.
There are around a dozen national insurance companies offering LTC, with a variety of policy types available. Currently, LTC carriers pay for about 20% of all the in-home care services provided in the country.
LTC insurance companies usually pay a fixed benefit per day, and have a maximum annual and lifetime benefit limit they will pay for in-home care (given certain necessary requirements are met). There are some long term care insurance plans that have a waiting period (deductible) that must be reached before you can claim any benefits for home care. Typically, the time when you’ll need the most assistance is at the beginning. This recovery time can be even more difficult for single persons.
If you choose a policy with a home care deductible, make sure you are prepared to cover the waiting period by either paying for the care yourself (out-of-pocket), or having unpaid help, such as a friend of family member.
Another thing you’ll need to consider, is whether or not you need a physician’s order, along with an initial assessment, documenting your need for assistance with the insured’s activities of daily living. Most agencies will offer you assistance in complying with the requirements of the LTC carrier you select.
These may include:
- Verification of policy benefits
- Performing a pre-evaluation
- Obtaining a doctor’s order
- Completing daily care notes
- And billing you for their services rendered.
Although the agency may offer you this assistance, it is generally your responsibility to pay the agency and to submit the bills to your LTC insurance carrier for reimbursement on your policy. Some agencies will do all of the paperwork for you, get paid directly by your LTC insurance company, then bill you for any shortfall your insurance won’t pay.
How To Choose a Good LTC Policy and Company?
A good plan design, when judging policies to choose from, is the National Association of Insurance Commissioners’ (NAIC) model laws and regulations, which recommends the following points of consideration:
- A minimum of one year of nursing home or home health care coverage, including intermediate and custodial care. Nursing home or home health care benefits shouldn’t be limited primarily to skilled care.
- Coverage for Alzheimer’s disease.
- An inflation protection option.
- An “outline of coverage” that systematically describes the policies benefits, limitations and exclusions, and lets you compare it with others.
- A guarantee that the policy cannot be cancelled, non-renewed or otherwise terminated because you get older or suffer deterioration in your physical or mental health.
- The right to return the policy for a full premium refund within 30 days, if after having received the policy, you decide you don’t want it.
- No requirements that policyholders first:
- Be hospitalized in order to receive nursing home benefits or home health care benefits.
- Receive skilled nursing home care before receiving intermediate or custodial nursing home care.
- Receive nursing home care before receiving benefits for home health care.
While researching for a long term care insurance plan, you will want to look for one that requires only two (2) ADLs to trigger benefits for home, community, or nursing home care. Some plans, primarily group plans, require three (3) ADLs for nursing home benefits to be triggered. This means you may have to wait a longer time period before your insurance is willing to pay.
When it comes to long term care insurance plans, “if it’s too good to be true, it probably is”.
It is important to understand that the top long term care insurance companies offer similar plans, as far as benefits, and even premiums, are concerned. What distinguishes them are their underwriting guidelines and how they are structured to pay out benefits.
On that same note, certain companies and group plans are known to subject their policyholders with multiple rate increases. The stricter the health guidelines, the healthier the client, the less likely a rate increase will occur in the future.
As the policyholder, you should be aware of what is in your policy. Including what the deductible, benefits, limitations, exclusions, benefit eligibility, conditions, care and services definitions, and rate increase history. All LTC insurance companies have this information available for you to review. Some may offer a “sample policy” or an “outline of coverage” that is available upon request.
Just as underwriting guidelines vary from company to company, so do Elimination Periods and Benefit Periods. A person may health-qualify for one company, but not another.
Also, be sure to take into account the company behind the insurance plan you select. Review its track record in terms of experience in long term care insurance, as well as policyholder’s reviews and ratings. Financial stability is another factor to consider.
The 10 largest LTC companies in annual premium revenue are as follows:
- Genworth Life Insurance
- John Hancock Life Insurance
- Conseco Senior Health
- Continental Casualty
- Banker’s Life and Casualty (Owned by Conseco)
- Metropolitan Life Insurance
- Penn Treaty American
- Unum Life Insurance
- MetLife Insurance
- Life Investors Insurance
When a LTC Insurance Policy Doesn’t Make Sense:
A long term care policy wouldn’t make sense for someone with low income, and little or no assets. You aren’t an ideal candidate for long term care insurance if:
- You are receiving, or may soon receive, Medicaid benefits;
- You have limited income/assets and cannot afford the premiums over the lifetime of your policy;
- Your only source of income is a social security benefit or supplemental security income.