Why do we buy insurance? There’s Homeowners insurance, health insurance, car insurance, and more. Buying insurance is a way to shift the risk of loss. We want to avoid the financial burden that insurance companies will pay for when calamity strikes. One type of insurance that most people don’t think about is Long Term Care Insurance (LTC Insurance). LTC Insurance helps with the financial costs associated with the need for assistance with Activities of Daily Living (ADLs). LTC Insurance steps in when Medicare and Medicare supplemental policies have been exhausted. It is used primarily by seniors but needs to be acquired much earlier.
For most people, LTC Insurance doesn’t cross their mind until it’s too late. Waiting too long to get LTC insurance results in higher premiums or denied coverage because you may be uninsurable or “rated.” The people that need Long Term Care insurance the most are those that can least afford it; middle class families that have enough assets to live but not enough to cover Long Term Care costs. For most middle class folks, waiting until your 60’s to inquire about coverage typically makes the premiums too expensive to pay for the coverage in retirement. Hence these families need to get this insurance in their 40’s to mid-50’s to make it affordable.
LTC Insurance policies do not have a standard. Comparing one LTC Insurance policy or company to another is like comparing apples to oranges. Definitions and coverages vary within companies and across the industry. When seeking an insurance agent, confirm they have experience with Long Term Care Insurance Policies. Below are a few key elements of Long Term Care Insurance policies that need to be on your radar.
-An Inflation rider: It is best to have a 5% inflation rider; however a 3% inflation rider is more affordable.
-Waiting Period: There is a waiting period between when you begin receiving appropriate services and when the policy begins paying; 90 days elimination period is about right for most people.
-Placement: Some policies begin coverage when you’re in your home, some when you enter Assisted Living, and some when you enter a Nursing Facility. You want a policy that covers all levels of care; home care and assisted living care are essential in any policy.
-Coverage: Typically, this is an amount per day. Long Term Care costs increase 5% – 6% every year so keep in mind that the daily rate charged by a facility could be significantly higher when you need the policy to payout.
-Premium: Make sure you can afford the premium when you enter retirement (most people have a lower income during retirement).
For couples over the age of 65, there is an 80% chance that one of them will require Long Term Care. Women are at a greater risk than men, and single women, particularly those without a devoted child, may need this coverage more than any other class of people. Come see us to find out your options for paying the costs of Long-Term Care.