Learn the Numbers before Buying Long Term Care Insurance
“Should I buy long term care insurance (LTCI)?” is a question often asked whenever one thinks of the future. In order for you to find out if you need a plan, the best course of action would be researching key figures related to the LTCI industry. Let’s help you out with this by presenting some relevant numbers and data to help you arrive at a decision.
Common Misconceptions of Long Term Care Insurance
An important aspect that needs to be clarified before purchasing an LTCI plan is to understand terminology. The phrase “long term care” doesn’t mean insurance – LTC is the means, methods, and processes done to administer care. An LTCI is one of the solutions one can use to fulfill a need.
Also, a majority of the population thinks that Medicare and Medicaid will cover long term care expenses. Although these options may offer some form of LTC coverage, both options’ scope are limited and qualifying for benefits may be too steep for most individuals (Medicaid requires customers to first declare their assets before benefits are paid).
What is Long Term Care Insurance?
A long term care insurance plan provides services to those who are encountering difficulties accomplishing basic, day-to-day activities, such as bathing, getting dressed, moving around, eating, etc. These activities are called Activities of Daily Living (ADLs).
There are a couple of things that you need to take note of when trying to decide on your long term care plan and in order to make it easier to understand long term care insurance. But to sum it up in a more manageable process, consider these two important factors:
- The total duration of the coverage – Coverage may range anywhere from 2 to 6 years. Choosing a coverage that allocates $250 a day will eventually be at an average of $270,000 for your benefits. With that said, using less than $250 a day may extend coverage for more than three years.
- Knowing the level of inflation protection on your policy – People usually make their initial claims in their 80s which are years after they first bought the policy. Having a 5% compound inflation protection rider increases the value of your benefits at 5% every year. This means that an initial value of $270,000 benefit amount would be at around a $730,000 figure in 20 years.
The two points above lets you identify what your coverage is worth after a certain amount of period. You can also determine how much you can use on a daily basis while avoiding circumstances which may lead to exhausting your benefits.
Crucial Factors that you should consider when picking your Long Term Care Plan
Age and health condition play a big part in deciding if one should purchase an LTCI. These two factors will allow one to identify if an LTCI is a viable choice for them to undertake. When it comes to spending, purchasing a policy at an early stage of one’s life may be a practical option – LTCI premiums scale in comparison with a policyholder’s age. One’s health should also be considered to identify the kind of care services a beneficiary should receive when he or she needs it (whether specialized nursing care is necessary or not). Other notable factors before asking the big question of “should I buy a long term care insurance plan” are:
When trying to pick a long term care insurance plan, you need to create a budget. You have to factor in the amount of financial support that can be afforded by your family. Enforcing a budget would allow you to plan and set aside money in case you need to spend outside projected figures.
Additionally, you need to factor in the cost of living in your area. Considering this factor will help you realistically identify how much funds you need to get on a daily basis. You also might want to factor in any additional savings that you have that you might want to tap in to.
Finally, you have to be sure to consider inflation rates and how to protect yourself against inflation. The ideal protection rate is at 5%. The given figure means that your daily benefit would increase at a rate of 5% per annum, which in turns increase the total benefits that you can receive during the duration of your coverage.
Should I Buy Long Term Care Insurance? Do the Math to Save Time and Resources
Take time to learn the current trends and statistics in the LTCI industry. Several online resources (UBS, NIH Senior Health, Kiplinger, etc.) can provide you with accessible and up-to-date information. Seeking available data online can allow you to crosscheck information once you meet with insurance providers. Also, do not be afraid of seeking advice from LTC agents and financial experts. Remember: your LTCI plan is for your future, so you’d want to make sure that you have relevant information to help lead you to a decision that will best fit your needs.
So, should I buy long term care insurance? Perhaps you’d want to do the research and math before deciding to purchase a plan. Learning the numbers will open up doors of opportunity in seeking out your LTCI plan. Do you have other suggestions that can help you make that LTCI decision? Please share it with us below.