long term care insurance

What is long-term care insurance and when should it be purchased?

Are you familiar with long-term care insurance? More importantly, did you know you should look into purchasing such insurance sooner rather than later? Federal studies suggest nearly one in seven of the aging American population will need long-term care services throughout a five-year period, later in life.

Americans spend an average of $85,000 each year on a semi-private room in a nursing home, according to AARP. When seniors are faced with having to find financial solutions to pay for medical necessities — such as a long-term care facility (i.e. nursing home), or if they could use a helping hand at home if they are unable to care for themselves — many turn to long-term care insurance (LTC insurance) where they had the forethought to purchase a policy as such.

About LTC insurance

Medicare does not usually cover most base long-term care needs.  While Medicaid will cover such needs in many cases, it is only after a strict application process in which you must prove that you are impoverished, according to state and federal regulations.

LTC insurance is the solution for those needing financial assistance when governmental programs can’t provide it. A sufficient LTC insurance policy will help cover senior-related costs in many instances, including when a loved one suffers from a chronic disease, such as Alzheimer’s. Due to increasing rates, it’s best to obtain an LTC policy before it is needed, before retirement.

Why purchase long-term care insurance?

There are two main reasons to buy LTC insurance. As stated earlier, neither Medicare nor Medicaid will cover all long-term expenses in many cases. Unless you can afford to pay out of pocket, you’ll need financial assistance to live out the golden years. Additionally, the health insurance policies we rely on before we grow older will not cover long-term care in our senior years. So, if you become ill at 70, don’t qualify for Medicaid, and can’t get Medicare to cover the costs for any medicines, long-term facility, or other services you may need, LTC insurance is a viable solution.

There are two types of LTC insurance:

Traditional/Stand-alone LTC insurance

For many, the most affordable LTC insurance falls under the realm of traditional or stand-alone insurance policies. For over 40 years, this type of LTC insurance reimburses policyholders for the actual cost of care, depending on the policy limit. It covers those who need assistance with dressing, feeding, bathing, toileting, continence and transferring. Traditional/stand-alone LTC insurance also covers costs for seniors with Alzheimer’s Disease and other debilitating diseases. Policy benefits range between $1,500 and $12,000 monthly, depending on the amount of coverage and the insurance company. The average benefit period falls between two and six  Like health insurance, additional benefits (riders) can be added onto the policy.

Hybrid/Whole life LTC insurance

A hybrid/whole life LTC insurance plan — also known as an asset-based LTC plan — is a combination of life insurance and an annuity with a LTC rider. This means if you are satisfied with your life insurance provider, you could possibly add LTC insurance with the life insurance policy that you currently maintain. (However, you may want to discuss this with a financial advisor prior to purchase). Also, hybrid/whole life plans are growing in popularity.  The product is not as commonplace as traditional plans, which could be due to policyholders needing appropriate levels of assets to reallocate for the purpose of LTC insurance.

Repurposing is a tax-free benefit of hybrids/whole-life insurance. Another benefit: if a policyholder is allowed to add an LTC rider to their life insurance plan, a portion of the benefit will be used for long-term care while the remainder will pay out as a death benefit. This could be a tremendously beneficial option for your and your family.  Again, it is likely best for you to consult a good financial advisor to consider what’s best for you.

How will you pay for long-term care?

If you are considering LTC insurance, begin to research your options in your forties, fifties or early sixties, before premiums increase and before unthinkable health situations occur.  As with most health-related insurances, your age and health status greatly impact the cost and availability of such insurances. If you are looking to shop now, there are financial advisors who provide coverage from multiple insurance companies. Contact our office if you have questions in this regard.

Financial advisors offer a variety of services, but all work to assess your financial situation, such as assets and debts. They work to help organize a client’s portfolio, which includes any finances you have as a senior. Our office has fostered relationships with financial advisors who offer the nation’s leading LTC insurance. We are happy to put you in touch with them for you to then determine if it’s best to work with them.

Remember, not all life insurance policies can carry an LTC rider. Therefore, it is important to speak with a financial advisor, or very good life insurance agent, to find the right solution for your long-term care needs. The good news is that we already have a roster of financial advisors ready and waiting to show you which LTC insurance options are suitable for you or your loved ones.

Of course the decisions to engage any of them is solely your choice.  Either way, the long-term care insurance question is an important to resolve asap.  Contact our office for more details!

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