Planning, Budgeting, and Reviewing Your Long Term Care Plan Options
There are many reasons that a person may require long-term care, but chances are good that you will need at least some form of assistance later in life. In fact, according to the U.S. Department of Health and Human Services, 70% of current 65-year-olds will use some form of long-term care in the future. Purchasing long-term care (LTC) insurance can help you prepare for when that time comes. LTC insurance policies are private policies that help pay for at least some of the costs of in-home, assisted living, or nursing home care, and can cover services that Medicare, Medicaid, and employer-provided health insurance do not.
How do these policies work? At its most basic, long-term care insurance has you pay premiums on a regular basis while you are still healthy, and once you require care it will reimburse you a daily amount to help pay for LTC services. This series of step-by-step articles will help walk you through the process of choosing and purchasing a long-term care insurance policy, and will show you what to expect when making your first claim and beyond.
1. Planning and Research for LTC Plans
Most people who opt to purchase a long-term care insurance policy do so in their late 50s or early 60s, though many experts recommend that you start shopping as early as 45-55 as part of your overall retirement plan. Age is important since it can directly influence the cost of your policy. It is generally best to purchase a policy before the age of 65, as the cost of premiums begins to rise sharply after that point. Additionally, your chance of being denied coverage or only allowed a minimal amount of coverage increases as you get older. While LTC insurance plans are costly no matter what, many people make them needlessly expensive by waiting too long before purchasing a plan. Because of this, starting your shopping early can be one of the best and easiest ways to make your LTC insurance plan more budget-friendly. Your health is also an important factor to consider. Waiting until you actually need care before purchasing coverage is generally not an option, as you won’t qualify for the insurance if you already have a serious condition.
Even if you don’t feel like you’re ready to purchase a policy just yet, it never hurts to start doing research early. Take a look at your family history and see whether you have relatives who have required long-term care, and if so, why they needed it, how long they needed it for, what kind of services they used, and so on. This kind of information can be highly valuable since many problems that require LTC, such as Alzheimer’s, can run in families. You should also start researching long-term care insurance itself, including its pros, cons, and costs, so that you can start thinking about whether it’s right for you. We have numerous articles on these subjects that can help get you started.
2. Budgeting and Weighing Options
While they can be greatly beneficial, LTC insurance policies might not be the right choice for everyone, especially those with low income and little savings. Whether LTC insurance is right for you will depend on your own preferences and situation. Before purchasing a long-term care insurance policy, take a close look at its cost and make sure that you will be able to keep up with your premiums without breaking your budget. When doing this, it is important to consider the possibility that those premiums will increase over time. While LTC insurance premiums are more stable than now than they have been in the past, a combination of the unpredictability of future events and the potential effect of a large number of long-lived baby boomers requiring care in the near future means that increases are still possible. It is generally recommended that you budget for your premiums to increase by as much as 50% at some point in the future. Remember also that while your premiums may go up over time, your income may decrease. All of this is important to take into consideration since failing to keep up with premiums could mean forfeiting all of the money that had been paid into the plan thus far.
It can also be beneficial to take a step back and look at just how much help a long-term care insurance policy will be giving you with your LTC-related expenses. Take a look at the amount of daily benefits a policy will offer and compare it to the average cost of care in your area. Keep in mind that you will have to pay the difference yourself in addition to paying for the insurance in the first place.
After taking all of this into account, consider whether your income will be sufficient to cover an LTC insurance plan that will cost thousands of dollars each year. The National Association of Insurance Commissioners recommends that you spend five percent or less of your income on an LTC insurance policy.
If you are already struggling to cover the costs of living, investing in something as expensive as LTC insurance probably isn’t a good idea. Those who cannot afford to purchase an LTC insurance policy may want to look at Medicaid instead, though that option is typically reserved for those who have already exhausted most of their savings. If you want to learn more about alternatives to LTC insurance that won’t require you to break the bank, check out our articles on the subject.
3. Further Advice, Guidance, and Information
Still not sure whether a long-term care insurance policy is right for you and your budget? Talk to a financial adviser or lawyer who specializes in the field. They can give you advice on how to save for long-term care expenses as well as explaining the pros and cons of buying this type of insurance. You can also take a look at our article “The Costs of Long-Term Care Insurance” to learn more about average prices and some of the main factors that influence how much you’ll pay for your policy.
Choosing and Purchasing Your LTC Insurance Policy
Help protect your savings from the costs of
care NOT COVERED
by traditional insurances or Government programs, like Medicare.
It helps you choose where you receive care and avoid the nursing
- 40% receiving long-term care are working-age adults, ages of
- About 70% over age 65 will need long-term care services in their
lifetime. By 2020, this number is expected to exceed 12 million.*
Financially strong A.M Best rated insurers with low complaint ratios
related to claims will send you quotes directly and promptly. You
may also have access to instant rate quotes, and side by side plan
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Sample Long-Term Care Insurance Savings
Up to 30% Spousal/Partner Discount
Up to 15% Preferred Health Discount
Up to 5% Small Business Discount
* Discounts are not cumulative and vary by state.