Long Term Care Insurance News
When you dress in the morning, it’s hard to believe that you may one day need someone to help you button your shirt or take you to the bathroom. But, should that day come, a long-term care insurance policy can pay for the help that you will need.
No one expects a stroke, chronic medical condition, disability, or dementia to result in the need to have a caregiver, but sometimes the unexpected happens. According to data from the Administration for Community Living (ACL), a person turning 65 years old today has a nearly 70 percent chance of needing some type of long-term care services and support.
Long-term care insurance helps to pay for these services. Policyholders pay premiums and file claims for reimbursement for services that may include occupational or physical therapy, skilled nursing care, and caregiving assistance with routine living activities, such as bathing, grooming, and getting in and out of bed. Care is usually done in a home, a nursing home, an assisted living facility, an adult daycare center, and other facilities.
Policies may offer coverage for two, three, four, and five years, and lifetime or unlimited coverage. Besides that, the policies have a waiting period that can run from 30 days to 180 days before the benefits begin. So, until the waiting period is over, policyholders must pay out of pocket for services.
Financial experts recommend reading a policy carefully to find out what the policy limits or excludes. For example, some policies limit or deny coverage on conditions or treatments resulting from alcoholism, drug addiction, war injuries, attempted suicide, or an intentionally self-inflicted injury.
What To Consider Before Buying Long-Term Care Insurance
Financial experts point to several factors to consider before buying a long-term care insurance policy. Unlike health, home, and auto insurance policies that can be purchased annually, a long-term care insurance policy is a one-time purchase, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI).
So, before shopping around for a policy, consider your age and health. The cost of a policy will depend on your age. Financial experts advise people to start looking for a policy in their late 40s or in their 50s because the older a person gets, the more the policy costs. Why is that? Because it’s assumed that people over 60 will have more health problems that require long-term care.
Another factor to consider is your overall financial condition. People with substantial assets may be able to cover long-term care expenses without buying an insurance plan.
Washington State’s New Long-Term Care Program
The state of Washington is poised to become the first state in the country to offer a state-operated, long-term care insurance program.
The state plans to fund the Washington Long Term Care Trust Act with a .0058 (0.58 percent) payroll tax on all employee wages. The program was to begin on January 1, 2022, but some state lawmakers wanted to make changes to the plan. So, Washington State Governor Jay Inslee delayed the tax collection until April.
Starting January 1, 2025, eligible residents can receive up to $36,500 in benefits to help pay for in-home care, home modifications, transportation to doctor appointments, home-delivered meals, reimbursement to unpaid family caregivers, and other services. Eligible state residents can opt-out of the public program if they have private long-term care insurance.
Paying for Long-Term Care Insurance
The cost of long-term care insurance depends on several factors, such as age, marital status, health, and gender. Women, for instance, usually pay more than men for insurance because they live longer. According to the ACL, women typically need care for an average of 3.7 years, while men require it for 2.2 years.
The AALTCI’s 2020 price index shows that a single 55-year-old male in good health who buys new coverage can expect to pay an average of $1,700 a year for a long-term care policy with an initial pool of benefits of $164,000. In contrast, a single 55-year-old female can expect to pay an average of $2,675 a year. Single women also pay more than couples. The average combined premiums for a 55-year-old couple, each buying that amount of coverage, are $3,050 a year.
One way of paying for long-term care insurance is out of pocket from a personal savings account. Also, a “hybrid” insurance can help pay for coverage, but it costs more than a traditional life insurance policy. A hybrid insurance policy combines a traditional life insurance policy with a long-term care rider. The rider covers in-home care, assisted living care, and other services. However, the costs for long-term care can reduce or eliminate the death benefit of the life insurance policy.
Besides a hybrid policy, policyholders can pay for long-term care insurance premiums tax-free from a health care savings account or exchange an existing life insurance policy or annuity for a long-term care policy, according to Christine Benz, director of personal finance at Morningstar, a Chicago-based financial services firm.
Keep in mind that traditional health care insurance and Medicare do not cover long-term care. While Medicare pays for short-term care in a nursing home or for skilled nursing care in a person’s home or rehabilitation facility, the government health care program does not pay for daily personal care.
On the other hand, Medicaid, the federal and state health insurance program, pays for personal care. But to qualify, individuals 65 years old and older and younger people with disabilities, must be below a certain income level.
Like other types of insurance, long-term care insurance has a full range of options. Before purchasing a policy, experts recommend consulting with insurance agents who sell policies from multiple companies to help you put a long-term care plan together. Benz says it is “valuable” to have a third-party agent who does not have a vested interest in just one insurance company helping you with the process.