Is Long-Term Care Insurance Right for Me?
This May, as we celebrate Older Americans Month, we are focusing on the need for a strong financial foundation and long-term care insurance might be an option to assist you in building your foundation. Coverage from a long-term care policy may pay some of the policyholder’s cost for a facility such as a nursing home, respite care, home-healthcare, and personal or adult day care for individuals 65 or older with chronic or prolonged illnesses, disabilities, or cognitive impairments. A study by the U.S. Department of Health and Human Services states 70% of the people turning 65 today will need some type of long-term care. Long-term care insurance can be purchased by anyone willing to pay the premiums.
Who should purchase long-term care insurance?
According to a Genworth 2020 study, the average nursing home cost in Iowa for a semi-private room is $6,570 a month and $7,148 a month for a private room. Medicare does not provide for long-term care coverage, and a long-term care policy only pays a specific dollar amount each day you spend in a nursing facility or for each home visit.
If you have limited income and resources, you may qualify for nursing facility Medicaid which requires a spend-down before qualifying. Please contact the Iowa Department of Human Services at 855-889-7985 for additional information regarding Medicaid nursing home benefits. If your resources are above Medicaid level but you cannot afford to pay out of pocket for nursing home costs you may want to consider purchasing long-term care insurance.
When should you purchase long-term care insurance?
Of course, if you purchase your long-term care policy at a younger age your premium will be cheaper but that also means years may be paid into the policy before you would ever need its benefits. If you purchase a policy when you are older, you may have a health history that may prevent you from obtaining a long-term care policy. Be aware that long-term insurance premiums increase as you age.
What types of care and services does a long-term care policy cover?
It is important to understand what a long-term care policy covers. An easy resource is the definitions page in the policy. Definitions to be aware of are the types of facilities covered, parameters on home health care, hospice, etc. There are three main levels of care a policy may cover: skilled care, intermediate, and custodial/personal. Skilled care may be covered by Medicare, and thus your long-term care policy may not pay. The personal level of care helps with activities of daily living and is the least intensive of the three levels of care. The activities of daily living (ADLs) include bathing, dressing, eating, transferring from a bed to a wheelchair and back, toileting, and continence. Most policies require you need assistance with at least two ADLs. Your policy defines what meets certain levels of care before benefits will be paid from the policy.
Long-term care insurance can be confusing, but the Iowa Senior Health Insurance Information Program (SHIIP) guide on long-term care insurance provides you with in-depth information to assist you in your decision-making. The guide includes information on many additional topics plus a checklist for use when shopping for a policy or evaluating an existing policy. If you need additional assistance, please contact SHIIP at 1-800-351-4664.
Are there alternatives to traditional long-term care insurance?
In recent years, the insurance industry has introduced new hybrid products as alternatives to long-term care insurance. Examples include life insurance and annuities with long-term care riders, and asset protection policies. Iowa’s asset protection policy is a partnership between Medicaid and private long-term insurers which provides an alternative to depleting assets. People who purchase partnership policies may be able to qualify for Medicaid before spending all of their assets. More information about the partnership can be found on the Iowa SHIIP website. Speak to a licensed insurance agent about the different types of policy options available. Ensure the company selling the insurance is stable by reviewing their credit rating at one of the several rating services, such as AM Best.
Another alternative is to save money specifically for long-term living care or make plans for care by family and friends. Since women generally live longer than men, the “Golden Girl Trend” is becoming popular.
Long-Term Care Insurance Purchasing Tips
Long-term care insurance is protection and like other types of insurance, you may pay for it and not need it.
Before buying a policy:
- Determine how much protection you may need
- Consider what other sources of income you will have in retirement to determine if a policy is needed
- Always review any policy that you purchase to ensure you understand the coverages, terms, and conditions
Confirm the provisions in the policy match what you were told during the sales process:
- Understand the requirements that must be met before the policy provides benefits. For example, is there an elimination period?
- Long-term care policies sold in Iowa require a 30-day minimum free-look period. Before the end of the free-look period, review your policy thoroughly and return it within the allotted time frame if you are not happy with any of the terms.
- Include a third party, family member, or friend to receive a lapse notice just in case your premium isn’t paid.
Long-term care policies can provide quality care when you need it, but the premiums can be expensive. Examine your financial situation closely and always have a plan to save for later. Consult a licensed insurance agent to discuss the different types of long-term care policies available and which one might be right for your situation.