Long-Term Care Insurance Explained

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Cheryl Knight · Writer · Dec 01, 2020
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    As you get older, your thoughts turn from working a job and providing for your retirement to considering options for long-term care in your golden years. And while health insurance is important and Medicare and Medicaid can pay for some costs associated with long-term care, it doesn’t always pay for the choices, benefits, and options that you want. For that, you need long-term care insurance.

    What Is Long-Term Care?

    Originally called nursing home insurance, long-term care insurance pays for such long-term services as custodial and personal care at your home or facility specifically designated for the elderly. Such policies reimburse their holders a set amount per day, up to the policy maximum for assistance with activities like eating, bathing, and dressing.
    When selecting care options and benefits for you or a loved one’s long-term care policy, the cost is affected by a variety of factors, including:
    • The age of the policy holder at the time the policy is purchased
    • The max amount that the policy will pay out for each day
    • The length of time that the policy will continue to pay for
    • The lifetime maximum amounts of the policy
    • Optional benefits chosen when you purchase the policy (including inflation)

    Who Needs Long-Term Care?

    Anyone who needs help performing two of the six activities on a list of activities of daily living (ADLs), including bathing, getting dressed, using the bathroom, continence, getting in/out of a bed or chair, and walking, needs long-term care.
    About 60% of the individuals receiving long-term care are over the age of 65, according to LongTermCare.gov. The rest, 40%, are between the ages of 18 and 64. In many cases, long-term care won’t be available once you have a change in your health condition, such as a heart attack or stroke, so it’s important to plan ahead and purchase a long-term care insurance plan before it gets to that point.

    What’s Covered Under Long-Term Care Insurance and How Much Does It Cost?

    A long-term care insurance policy will cover a variety of care options, including nursing home and in-home care, as well as living in an assisted living facility. If you opt to purchase a long-term insurance policy, you’ll have to choose which type you want. The specific types include:
    Traditional long-term care insurance: This is the standard long-term care policy. A traditional plan will pay for the care you need when you need it, at least until your policy maximums are reached. For this plan, a 60-year-old married couple can expect to pay at least $3,400 a year.
    Hybrid life and long-term care policy: You can also purchase a hybrid life and long-term care policy, which combines your life insurance with your long-term care policy. This allows you to access your death benefits while you’re still living to help pay for your long-term care.
    Unfortunately, the downside to such a policy is the cost, which can run you thousands of dollars more than a traditional long-term care policy. This is because with a hybrid policy you are also having to purchase life insurance alongside the long-term care insurance policy.
    So, when you should buy a long-term care policy? The answer depends on who you ask. Some will say you should buy a policy at age 50 to save money on your premiums (which will be lower), while others recommend age 60. And while waiting until you are age 60 means you will pay a higher premium overall, you can end up saving thousands of dollars in premium costs.
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