What is Long Term Care Insurance
Taking the time to apply and purchase long term care insurance (LTCI) is an important step to secure your future. Without the necessary coverage, you (and in effect, your loved ones) may, unfortunately, discover that your hard-earned savings may not be enough to pay for the care and support you deserve during the later years. To better visualize the impact of not being covered for the twilight years, let’s find out more with this scenario:
Samantha, a wonderful wife to an engineer and a mother to four successful businessmen, has been diagnosed with a serious illness related to her aging. Though frustrated with her circumstances, she and her family had been able to save some money, in case something like her disease happens. With the doctor’s suggestion for her to receive continuous rehabilitation in a nursing home, she sadly packed her bags to stay in the facility.
Although the tests and medications are expected to relieve – and eventually, fully recover – Samantha’s condition, the costs involved for her long term care services were unexpected. The savings that Samantha’s family was able to gather weren’t enough to pay for care and support expenses, which was projected to be from $10,000 to $11,000 per month. With bills and other expenses piling up, Samantha’s family had no choice but to sell some of their prized possessions.
And that’s just one scenario. Others may be bleaker, with the elderly transferring all their assets over to their children just to be covered by Medicaid; another opting to skip efficient caregiving attention to live out their days in pain. Which is why you (and if applicable, your parents and other loved ones) need to start doing something about long term care.
Knowing More About LTCI
First and foremost, insurance for long term care focuses on assisting policy holders with their activities of daily living (ADLs). These basic tasks involve activities such as eating and bathing (more information can be found on our previous LTC article here).
LTCI shouldn’t be mistaken as a way to pay for treatment for a disorder, disease, or mental condition related to aging. The coverage is meant to pay for the often long and costly care and support that a policy holder may get from caregivers or nursing homes.
Types of LTCI
Coverage for long term care is offered in two types:
Traditional LTCI – the most common type of policy, traditional LTCI policy holders pay each year for the plan until they receive care. Premiums are then waved once care is provided. The benefit period of a traditional LTCI policy is usually limited to 5 years, but policies are eligible for a partnership program (Medicaid asset protection). Additionally, premiums may increase, subject to the policy holder’s insurance commissioner at his or her state.
Hybrid LTCI – combination life and long term care insurances are slowly being seen as a more practical and cost-efficient option. This type allows individuals to be flexible with their benefits, by providing LTC if they need it, a death benefit if no LTC was chosen, or both with a limited amount of care. Benefit periods can extend to a lifetime, but policies are not anymore eligible for a partnership program (Medicaid asset protection). In terms of premiums, they are guaranteed with rates never increasing.
Aside from individual plans, LTCI can also be offered as shared policies (pertaining to couples or spouses) that may be more affordable than single or per-individual purchases. Group plans are also available, for companies who choose to buy in bulk for their employees’ welfare.
Qualifications and Cost
As a rule of thumb, applying early for an LTCI is seen to be a practical move. This is because the cost of a plan depends on how old an individual is when he or she first bought the plan. Also, the younger a person applies increases the probability of being qualified for benefits. Older people may have mental or health conditions that are seen as risks by LTC insurance companies, making these people ineligible for coverage.
Primarily for the costs, the price of premiums to be paid depends on the initial age of the holder when he or she bought a plan. This cost scales as a person grows, thus making early applications a cost-efficient strategy. Also, prices depend on the maximum amount a policy will pay per day, and the maximum number of days (years) a policy will pay. On top of these, any additional riders or optional benefits that an individual may choose to get together with the plan, such as an inflation rider, plays a part on the price.
Should I Get an LTCI?
Getting coverage all boils down to you, but basing on the given scenario mentioned above, an LTCI may save you the heartbreak and pain of spending large amounts of money for essential care services. Accordingly, LTC is an important facet of life that more people need to take their time to ponder on and purchase. In fact, the U.S. Department of Health & Human Services mentioned on one of their studies that almost 70% of U.S. citizens at the age of 65 and above are expected to have some form care and assistance on accomplishing their ADLs. To emphasize on the costs, average annual expenses for LTC may reach up to $45,000 – $88,000.
Start planning, applying, and purchasing an LTC insurance today to get the most out of your money. Please leave us a comment below if you have any questions!
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