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Using Long Term Care Insurance to Pay for Senior Care
| Definition |
Qualifications |
Costs |
| Pros & Cons |
Benefit Types & Limits |
How to Apply |
| Overview of Long Term Care Insurance | ||
Long Term Care Insurance, sometimes called Nursing Home Insurance, is a policy that pays for some or all a senior’s long-term care costs in exchange for monthly premiums that typically range from $200-$500 / month. Depending on the policy, medical services at home, in adult day care, in assisted living and in nursing home communities can be included.
Should a senior have long term care insurance already, then they are probably familiar with how it can help with the costs of long term care.
If one does not have long term care (LTC) insurance but has an immediate need to pay for long term care, this option probably will not help. Insurers typically do not accept new, elderly enrollees if they are already receiving or in need of care. Even seniors not requiring immediate care but in frail health are often rejected. If a senior is accepted, the insurance can be very expensive.
LTC insurance is attractive because the monthly premiums are known in advance and therefore can be built into a budget. Plans are very flexible and can be structured to meet variety of needs.
Plans can cover the costs of in-home care, adult day care, assisted living, skilled nursing or all of them. One may choose a daily or monthly care allowance. For example, a plan can payout $50 / day if the individual resides at home and $150 / day if they are in a facility. Alternatively, one may choose coverage areas, like skilled nursing but not assisted living. In some rare cases, a family caregiver can even receive payments for the home care they provide.
For healthy seniors, Consumer Reports recommends not purchasing coverage before the age of 60. The older a senior is, the higher their monthly premiums with the expectation that the senior will be paying those premiums for a shorter period of time before they need benefits.
In choosing a policy, there are a dizzying number of decisions, options and fine print legalese which can make selecting the right insurance a very tricky process. Follows is a list of some of the considerations of which potential buyers should be aware:
- If selecting a care allowance plan, consider how the cost of care may change at some unknown point in the future when the care is required?
- What is the appropriate deductible amount for the senior’s’ resources, now and at any point in the future?
- What is monthly premium the senior can afford, recognizing that premiums will increase? How might that change over time?
- How long of an “elimination period” or the number of days the senior requires care before benefits begin?
- Does the policy overlap with private health insurance, Medicare or Medigap now or at some point in the future?
- What day of month are the benefits are paid out vs. what day nursing home payments become due?
- What period of time should the policy cover? The average stay in skilled nursing is 2.5 years, but one does not want a policy to max out just when it is needed most.
- Is an indemnity / daily care allowance better for the senior then a policy that covers only the expenses incurred?
- Does one prefer a non-forfeiture clause that enables a senior to receive money back if they have to cancel a policy? At what additional charge?
- Should the policy cover drugs and/or medical equipment? At what additional cost?
- Is a tax-qualified plan that allows the senior to deduct their premiums appropriate?
- Is a “partnership plan” that allows the senior to protect their assets appropriate?
It may be worthwhile to find a long term care advisor / broker that can help determine what one’s future care costs might be and choose a policy that will avoid unpleasant “gotchas” when it is actually needed. Alternatively, Amazon offers several long term care insurance guidebooks.
Be Aware That:
If an individual is receiving care or in poor health they most likely are not eligible for long term care insurance or it will be prohibitively expensive.
Long Term Care Insurance is Also Known As:
-LTC Insurance
-Nursing Home Insurance
-Nursing Home Insurance
Age Requirements
There are no age requirements to purchase long term care insurance. While insurance companies may recommend an individual purchase the policy as young as 40 yrs old, Consumer Reports recommends waiting until the age of 60.
Disabilities / Health Requirements
Applicants for long term care insurance need to be in good health. Elderly individuals will likely be denied if they already require long-term care or need help with activities of daily living such as bathing and dressing or have any of the following conditions: AIDS, Alzheimer's, Parkinson’s, MS, any dementia or progressive neurological condition. Strokes or metastatic cancer.
Family Status
Marital status typically does not affect eligibility for long term care insurance.
Financial Status Requirements
Seniors’ financial status does not affect eligibility for long term care insurance provided the senior can afford the monthly premiums.
Veteran Status Requirements
Veteran status does not typically play a role in eligibility for long term care insurance.
Geographic Requirements
Geographic location does not typically play a role in eligibility for long term care insurance.
Types of Benefit Payout
Long term care insurance benefits depend entirely on the policy. A policy may cover in-home care, adult day care, assisted living, skilled nursing or all of them.
Restrictions on How Payout Can be Used
Long term care insurance benefit restrictions depend entirely on the policy. Some plans will reimburse seniors and others will make payments directly to the service providers. Most do require that a professional service take place to receive the benefit. For example, a family member won’t be compensated for the care they give.
Benefits Amounts & Limits
Long term care insurance benefit limits depend entirely on the policy. There are plans with annual limits, total dollar limits as well as unlimited plans.
One can also choose daily or monthly limits and align those to specific care situations. For example, $50 / day if the individual resides at home and $150 / day if they are in skilled nursing.
One can also choose daily or monthly limits and align those to specific care situations. For example, $50 / day if the individual resides at home and $150 / day if they are in skilled nursing.
Time to Receive Benefits
While there is no official holding period on benefits, long term care insurances policyholders do not pass the screens unless they are in moderate to good health. The insurers expect years of premiums payments before they have to make benefits payouts.
There are also “elimination periods”. This is the period of time after a policy becomes active before the senior is eligible for any benefits. Typically these are 20-100 days, but some are even longer.
There are also “elimination periods”. This is the period of time after a policy becomes active before the senior is eligible for any benefits. Typically these are 20-100 days, but some are even longer.
This Source Can Help For
Long term care insurance benefits depend entirely on the policy. A policy may cover in-home care, adult day care, Alzheimer's or dementia care, assisted living or skilled nursing home care or all of them.
Long term care insurance cost is based on variety of factors including; benefits covered, current age, age at the start of coverage and the health of applicant. Seniors should expect to pay between $2,000 - $5,000 per year. The average annual premiums by age group are as follows:
- Ages 55 to 64 - $2,000
- Ages 65 to 69 - $2,200
- Ages 70 to 74 - $2,500
- Age 75 or more - $2,800
It is recommended that seniors use the services of a broker / advisor who is not tied to any one insurance provider. This eliminates some of the conflict of interest that long term care insurance salespersons may have. A salesperson might be tempted to sell a more expensive policy that does not necessarily suit a senior’s needs. Typically there are no fees to use a broker / advisor. One LTC insurance broker can be found here.
