Long-term care insurance is basically nursing home or assisted living  insurance. It pays for the long-term care (LTC) services some folks  will need as they age or become ill and need help with daily tasks like  getting dressed, bathing and more.

And long-term care can get expensive—really expensive.  According to the Alzheimer’s Association, the estimated cost for  end-of-life care in 2019 ranged between $233,000 and $367,000. Most health and disability insurances won’t cover long-term care, but long-term care insurance will.

Finding an independent insurance broker who will shop several  different long-term care companies and get you quotes can save you  thousands of dollars and loads of unnecessary worries.

 

• Nursing home care
• Assisted living facilities
• Adult day care services
• In-home care
• Home modification
• Care coordination
   

Not all policies are the same, so talk to your independent insurance agent to find the best fit for your needs.

Did you know that over 14 million adults needed long-term care services in 2020? Purchasing Long-Term Care Insurance can give you peace of mind and protect the nest egg you worked so hard to build. You’ll know that if  you become ill, you can afford the care you need and still have enough  money in your nest egg for you and your spouse to eat. Plus, your kids  won’t be burdened with huge payments for your care. 

Now you may be thinking: What about government programs? Can’t they help? Don’t  make the mistake of believing Medicare will cover long-term care costs.  It doesn’t. And while Medicaid—the government program designed for  people who truly don’t have any money—will cover long-term care  expenses, it should never be your first choice.

Legal Point : It’s common for people to try to cheat  the system by moving assets out of their parent’s name to get the  government to pay for LTC without touching those assets. That is  considered fraud—a federal crime—and the government will prosecute you!  Don’t fall into that trap.

 

Traditional long-term care insurance is a no-frills, standalone  insurance policy. All it does is offer to pay for long-term care  services when you need them. That’s it!

When does a traditional policy kick in? The policy is triggered when  you can no longer perform two out of six activities of daily living  (such as dressing, bathing, eating, or transferring to a wheelchair) or  suffer from severe cognitive impairment. After a waiting period of 30–90  days, your benefits should start coming in.

 

Breaking Down The Costs Associated With Long Term Care

The median cost of a semiprivate nursing  home room nationwide is $90,155 per year. Assisted living runs $48,600  annually, and home health aides charge $144 per day. That’s  expensive! Traditional long-term care insurance ensures that no matter  where you need care, you’ll have the money to cover at least a portion  of the bill. That way, a lengthy stay at a nursing home is less likely  to drain your savings or wipe out your estate.

The average annual long-term care insurance premium for a 60-year-old couple is around $3,400 (or about $283 per month).  As  far as the payout, the typical long-term insurance policy provides a  benefit of $160 per day for nursing home care for a set number of years  (three is most common).  Plus, you can add an inflation rider that increases your benefit over  time, typically by 3% a year (but fair warning, that will probably cost  you a little extra).

 

Another option is a policy that combines life insurance with  long-term care coverage. With a hybrid policy, you can access the death  benefit—the money that your beneficiaries would receive in the event of  your death—while you are still alive to pay for long-term care.

And if you end up not needing care, your heirs get the full payout.  Rates are considered “non-cancellable,” which means premiums are fixed  for life.

But brace yourselves—the price tag for a hybrid policy is usually thousands of  dollars more expensive than a traditional policy. That’s because you’re  also buying life insurance you might not even need along with LTC  coverage. And unlike traditional long-term care insurance, the premiums  for hybrid policies are not tax-deductible.

Similar to whole life insurance, insurance companies invest the money  in your hybrid policy. The problem is they’re not making good  investments and your returns will probably barely keep pace with  inflation. Those lost earnings could end up making hybrids the most  expensive long-term care policy of all.

That’s why hybrid policies should generally be a last resort. The  only time you might consider buying one is if you can’t qualify for a  traditional long-term care insurance policy due to medical underwriting.  Other than that, buy long-term care insurance and life insurance  separately—don’t try to marry the two!

 

OK, Dave suggests waiting until age 60 to buy long-term care insurance because the likelihood of you filing a claim before then is slim. So  you’ll want to buy a long-term care policy as a 60th birthday present  to yourself! Statistically, 95% of LTC claims are filed for people over  age 70.

You may assume that you’ll pay less if you buy your policy at age 50  and lock in a lower monthly premium instead of waiting until age 60. But  Dave will never tell you to buy something based on how much the monthly  payment is. That’s what broke people do, right? It’s about what you need, when you need it.

 

While it might seem cheaper to buy LTC at age 50, the numbers tell a different story.

An estimated LTC premium for a healthy 50-year-old man is $1,657 per year. If the policy remains in effect until this person is 95, he can spend approximately $74,565 in LTC premiums. For a healthy 60-year-old man, an estimated premium is $1,811. If he keeps the policy until he’s 95, it can cost him $63,385 overall.

You can already see how buying at age 60 is a better deal! But what  would happen if, instead of buying LTC at age 50, you invest that $1,657  each year until age 60? You could have roughly $30,000! If you keep  that money invested until age 95 and never add anything to it, you could  potentially have over $1.3 million! That’s not too shabby!

Many people worry that if they wait until age 60 to buy LTC, they’ll  develop a medical condition that will either prevent them from  qualifying for coverage or significantly raise their premiums. If you  have a family history of illness at a young age, or you are losing sleep  because you’re worried about getting sick and not being able to afford  care, then buy LTC when you can afford it. The peace of mind is worth  more than any cash you’ll save on premiums. Just don’t buy LTC at a  young age because you think you’ll save money by doing it.

As you can see above, that’s just not true.

 

OK, what’s the best way to find long-term care insurance? Go to an  independent insurance agent. They’ll shop among several different  insurance companies to find you the best price based on your particular  location, situation, age, health and other factors. Long-term care is an  important decision, so make sure you get a professional on your side!

 

LITTLE KNOWN FACT

Initially the cost for women was less than men for a LTC policy.  However, the Insurance companies began to notice that married women were the main caretakers for their husbands, and thus they outlived the husbands most often and usually by many years.  They also saw that due to the wives being the primary caretakers, the men spent significantly less time in Long Term Care Facilities because they were cared for at home.  But, after they were gone, their wives tended to spend more time in a Long Term Care Facility due to the fact that no one was left to take care of them. 

This is sad and I wish children and grandchildren of aging parents understood the importance of repaying the debt our parents undertook when they cared and nurtured us from birth until we left home.  It can be difficult, but it is worth having family discussions so our parents will never feel unwanted or forgotten, it really is the least we can do. I know many times parents retire to warmer areas so they can enjoy their retirement years, but having a long term plan for their parents is something all children should want.  

The last thing I want to leave you with is to consider one of the many Riders offered for LTC Policies.  (A rider can add valuable benefits, but you must determine which riders  are worth the extra cost. Some riders add to the cost without a  corresponding increase in benefits). You can purchase various Add-ons or Supplements to your Long Term Care Policy, if you know what to look for.  Here are what we at Braden MSI Insurance Services believe are the top 2 Riders for any LTC Policy.just a few things we believe everyone should consider.

 

We believe that the Spousal Benefit Rider is one of the "most significant riders" is the spousal benefit rider.

"This  enables each spouse to tap the other's pool of benefits. As a result,  each individual could purchase, say, a three-year plan of protection,  which would be significantly less expensive than a five-year benefit."

Adding a spousal rider to your long-term care insurance policy  might increase the cost about 15 percent, but it would give both  policyholders access to five or six years of benefits.

 

INFLATION RIDER

No matter which long-term care policy you buy, everyone should buy an Inflation Rider. This  option is both an important and valuable option. These riders help ensure that your long-term care  insurance benefits keep pace with the escalating cost of health care.

Generally two riders are offered, one that covers inflation up to 3% annually, this is the more affordable and this more popular rider chosen.  However, a Compound Rider that automatically increases 5% will double the initial daily benefit every 14 years.  So, as an example, if you purchased a policy at age 60 with a $100 per day benefit, that daily benefit would be $200 per day when you are 74 in comparison to $154 per day if you chose the 3% Inflation Rider.

Because this coverage is so important, insurance regulators in many states  require any purchaser of a long-term care policy to specifically reject the inflation rider if they don't want it.

Nearly all long-term care insurance policies have some form of home health care included in a basic LTC policy.

The  most common long-term care policies are those termed "tax-qualified."  That means they follow certain consumer-protection guidelines set by the  National Association of Insurance Commissioners and the Health  Insurance Portability and Accountability Act (HIPAA). That also means  that when you use a benefit, it is not considered taxable income.

In  the past, some insurers offered home health care as a rider. Now, all  tax-qualified basic long-term care insurance policies cover some home  health care. If you are among those rare few with a non-tax-qualified  policy, ask your insurance agent if you have home health care coverage.