However, most people will need long-term care at some point in their lifetimes. In this article, I’ll explain what long-term care insurance is, 耀竣金融配资_在线配资炒股:who needs it, when you should buy it and more.
Table of Contents
- What Is Long-Term Care Insurance (LTCI)?
- 耀竣金融配资_在线配资炒股:Who Needs Long-Term Care Insurance?
- When Should You Purchase Long-Term Care Insurance?
- How To Find Long-Term Care Insurance
- How Much Does LTCI Cost?
- How Long-Term Care Insurance Works
What Is Long-Term Care Insurance (LTCI)?Long-term care insurance, or LTCI, is insurance that pays for a specific subset of medical expenses for yourself or your family member. LTCI policies typically cover the cost of paying someone to help you with what are called “activities of daily living” such as:
- Going to the bathroom
- Getting in and out of bed
- Getting dressed
A successful claim on a long-term care policy unlocks daily money to help you pay for assistance with routine activities.LTCI claims usually apply to people living in nursing homes or assisted living facilities as well as people who require in-home aid and/or those who visit adult daycare centers. It’s a type of health insurance that often gets overlooked. But it can be extremely important for financial planning.
Who Needs Long-Term Care Insurance?According to 2021 data from the , a federal agency, eventually need some type of long-term care (LTC).
“People think the government’s going to pay. But let me tell you, the government requires that you completely impoverish yourself before they’ll pay through the Medicaid program,” Clark says. “You can have no assets. They ultimately take your family home. They take everything if you depend on the government.
“It’s your choice. Take your chances that you’ll be in the small group of people that will never need help in old age or buy insurance to cover yourself.”
When Should You Purchase Long-Term Care Insurance?The best time to purchase long-term care insurance is in your late 50s or early 60s, according to Clark. At that age, you may have greater cash flow. You are probably still young and healthy enough to pass the medical underwriting as well, Clark reasons. You may also want to consider purchasing LTCI if you have a parent in that age range (or older) who isn’t covered. In that situation, you may want to buy long-term care insurance to protect your inheritance or to keep your family finances safe. But Clark says you also shouldn’t jump the gun: “The premiums are not guaranteed. So you can even start at a higher premium and it will go up at some point in the future, which is why I don’t like people to buy long-term care insurance too young. “Because you may pay for it for years and years and you get closer to an age 20, 30 years later where you’re going to use it, and they raise the premiums so much that you have to give up the policy after you’ve been paying for it for a generation.”
How To Find Long-Term Care InsuranceUnder the hood of any insurance company, you’ll find a team of actuaries. When setting policy prices, they build in a margin for error and layer in profit on top of their estimates. But as it turns out, predicting the cost of long-term care years into the future isn’t easy. The number of long-term care insurance providers is shrinking fast: People are living longer, so more people are reaching old age and making claims. Clark recommends working with an independent agent who can shop for policies from a variety of companies on your behalf. The following brokers are major players in the space that offer free quotes:
How Much Coverage Should You Buy?Clark suggests looking for a long-term care insurance policy with a five-year benefit and an upfront waiting period of six months. He also acknowledges that some people will need long-term care for much longer than five years. “The idea of the five years is the percentage of people you’re going to cover goes up significantly from three years to five,” Clark says. “The average woman [needs long-term care for] 3.7 years. So that means a lot of people are going to need it for more than five years.” According to Clark, medical inflation outpaces the . He wants you to buy a policy from a company that will adjust the amount of its benefit over time — as much as 3 to 5% annually.
How Much Does LTCI Cost?The problem with long-term care insurance policies is that the premiums aren’t guaranteed to stay the same. They sometimes increase if state regulators approve changes.
- Marital status
- Insurance company
- Coverage amount
- Waiting period
Long-Term Care Alternative: Hybrid Policies
A generation ago, hybrid insurance policies didn’t exist. Now, these are alternatives to LTCI. A hybrid policy is a 耀竣金融配资_在线配资炒股:whole life insurance policy that you can draw from to pay for long-term care.Traditionally, the money you pay for your LTCI premiums vanishes when you die, even if you never made a claim. So one of the benefits of these hybrid policies is that if you die, your heirs get a portion of your premiums back. The other main benefit of a hybrid policy is that you can lock in your premiums. You’ll never have to worry about a price increase, unlike those with traditional LTCI policies. If you’re older or if you already have health issues, you may be more likely to qualify for a hybrid policy than a LTCI policy.