Americans are living longer, which means more time to spend with loved ones. However, it also means rising health care costs in old age. As you get older, you may need more help to complete basic functions, and that’s where long-term care insurance (LCTI) comes in.
LCTI helps cover critical health care services that are not typically paid for by traditional health insurance policies or Medicare, including nursing homes, in-home care, adult daycare, and more.
Many people may be unfamiliar with Long Term Care Insurance and whether they should purchase a policy. This guide will help demystify LTCI, explaining what it is, why it matters, and how it works to protect your future. LTCI policies are an investment, so it’s important to understand if it’s right for you and your loved ones before purchasing a policy.
What Is Long-Term Care Insurance?
So, what is a long-term insurance policy? LTCI is a type of insurance that helps cover the costs of extended care services, including care at home, assisted living, memory care, nursing facilities, and other related services. It differs from a traditional health insurance policy, which covers health-related issues, not caregiving support services.
Typically, long-term care insurance applies to services that provide daily living support, and you can only use your policy if you can no longer complete two or more basic functions. The loss of basic functions that trigger an LTCI policy includes bathing, using the bathroom, dressing, eating, and transferring. LTCI policies can help cover the costs of many chronic medical conditions and disabilities.
These insurance policies fill the gaps left by traditional health insurance, Medicare, and Medicaid, thereby reducing your out-of-pocket expenses and making it more accessible to receive the care you need.
Why Long-Term Care Insurance Is Important
As adults, we take many steps to plan for our financial futures, saving for retirement so we can live out our golden years in peace. Retirement planning should also include contingency plans for potential health issues, including the need for long-term care. It’s crucial for your financial security and that of your loved ones.
The cost of care continues to rise year over year. The average price of long-term care can exceed $100,000 annually, depending on the type of services you need. That can quickly drain your savings, causing you to rely on others to maintain your care.
Medicare offers minimal long-term care coverage, and Medicaid requires you to spend down your assets, which can be devastating if you were planning to leave your legacy to your loved ones. Even still, with changing regulations, it can be challenging to determine which government programs will cover your care when you need it.
It can be economically risky to rely on personal savings or government programs alone, and LTCI policies can help cover that gap, providing peace of mind that you’ll be able to receive the care you need without financial devastation.
LTCI provides you with more financial control, protecting your assets and alleviating the financial and emotional burden on family caregivers. Your policy will cover qualifying care to help increase your quality of life and allow you to enjoy your later years, regardless of your health conditions and care needs.
How Long-Term Care Insurance Works
Like traditional health insurance, you need to provide a medical history and choose the type of coverage you’d like to secure. The rates you will pay for your policy will vary based on your age, health condition, gender, marital status, and the amount of coverage you select.
So, how does long-term care work? Each month, you’ll pay a premium towards your LTCI policy, and these premiums are being paid in exchange for future benefits once your eligibility is triggered. Your benefits begin when you can’t perform two or more activities of daily living (ADLs) like bathing, dressing, eating, and other basic functions. Cognitive impairments, like dementia, can also trigger it.
Each long-term care policy has an elimination period, which is the time you have to pay for services out of pocket before your benefits kick in. You can think of this as similar to a deductible, though instead of a financial amount, you have to meet a specific time frame. Typically, a long-term care insurance policy’s elimination period will be between 30, 60, and 90 days. Once you have passed your elimination period, your LTCI will take effect and begin to cover the costs of services.
LTCI policies cover a range of services, including home care, nursing home care, assisted living, memory care, adult day care, and other related care options. The flexibility LTC insurance gives policyholders more control over the type of care they receive. They won’t be limited to specific care facilities, such as those covered by Medicare, Medicaid, and other health insurance policies.
This choice provides additional peace of mind knowing the future of your care is in your own hands.
Key Features of LTC Insurance Policies
Long-term care insurance policies may seem confusing to some, so let’s explore some of the key features.
- Limits, including a daily or monthly benefit limit. That means anything over that amount will be your responsibility. If you spend under the limit, you should be able to roll over the unused amount. Some policies have a lifetime maximum, which is the maximum amount a policy will pay out over its lifetime.
- Inflation protection will increase your policy’s benefits over time to help meet the continued rising costs of care. Otherwise, your policy may not be as valuable when you need to use it.
- Shared care for couples allows spouses to combine their policy benefits.
- Return-of-premium feature refunds premiums if you don’t need to use the policy. These refunds can be either complete or partial, depending on the policy.
The best aspects of LTCI policies are that they can be tailored to meet your specific needs, including your budget and care preferences. Please note that features may vary by policy, so it’s essential to understand the options available to you based on your specific policy.
Who Should Consider Long-Term Care Insurance?
Long-term care insurance policies aren’t right for everyone, so let’s consider who these policies may be beneficial for.
- Adults in their 40s to early 60s. They are ideal candidates based on their health to secure better premiums. They are more likely to be insured because of a lack of pre-existing conditions.
- Individuals who want to protect their assets. If you don’t want to spend your hard-earned money on health care in your later years, you may consider securing an LTCI policy. This will protect you from any spend-down requirements.
- Anyone who values choice, independence, and avoiding reliance on government programs or family. It can be so stressful to rely on others, especially for those who value their autonomy. LTCI policies can help you maintain control over your health care.
You should not get an LTCI policy if you cannot afford the monthly premium. Rates will increase over time, so if you are already living paycheck to paycheck, it may not be the right time to secure a policy.
How to Choose the Right Policy
Once you have decided to purchase a LTCI policy, there are several factors to consider to ensure you select the right one for you.
- Compare multiple quotes, coverage limits, elimination periods, and inflation options. Rates and terms will vary from company to company, as well as the features you choose. Longer elimination periods may be more cost-effective, but they will result in a higher initial out-of-pocket cost.
- Work with a licensed agent or specialist who understands LTCI and state-specific rules. LTCI can be complex, so be sure to work with someone who has a deep knowledge of the area and can guide you through the process, answering all your questions.
- Consider long-term financial goals, health history, and potential family support. Most adults will likely require some form of basic care as they age, and LTCI policies can help alleviate that financial burden.
Long-term care insurance is an investment in your future, enabling you to protect your assets while maintaining high-quality care.
Washington State Considerations
The state of Washington acknowledges a gap in long-term care funding and has taken steps to address it through the WA Cares Fund. This program mandates a long-term care payroll tax of 0.58%. However, if you purchase LTC insurance, you may be permanently exempt from the tax, allowing you to spend your money as you wish.
By purchasing private LTC plans in Washington, residents are taking control of their financial future. Public funding and programming can be limited, so there is no guarantee the program will be available when you need to utilize it. As a result, Washington residents should evaluate private coverage as part of their overall financial strategy and retirement planning.
Conclusion
For many, long-term care insurance offers peace of mind, financial security, and greater control over their future care. It allows you to choose when and how you receive care once you are eligible, reducing the financial and emotional burden of care. Planning early for your future will provide more care options and affordable premiums, so it’s essential to explore your options to protect your independence and legacy.
Start today by reaching out to Lavine LTC Benefits for more information on securing a long-term care insurance policy. We can help you understand which policy is right for you and reduce the burden of your future care. So, what are you waiting for? Contact Raymond at 253.275.6091