Understanding the Need for Long-Term Care Insurance
Extended care whether received at home or in a medical setting is expensive, which is why many people choose to prepare by purchasing long-term care insurance.
Long-term care insurance helps pay for medical and personal care for extended periods of time. Regular health insurance, as well as Medicare, will not generally cover such costs.
Most long-term care insurance policies cover a specific dollar amount for each day spent in a care facility or with an at-home aide. There are policies that provide full coverage, so it is important to review all of the available options.
What’s the Cost?
The average cost of long-term care insurance is around $2,000 annually. The cost of an individual policy is based upon a number of factors. These include:
Age and Health: A person’s age and health affect how much their insurance policy will be. An older person with existing health concerns may pay more.
Gender: Women typically have higher insurance policies since, on average, they live longer than men.
Marital Status: Premiums are lower for married couples.
Amount of Coverage: This is the amount per day multiplied by the number of days.
Insurance Company: Every provider is different, so prices will vary!
When to Buy
The American Association for Long-Term Care Insurance (AALTCI) recommends that adults purchase a policy in their mid-50s. This may seem early, but taking out an insurance policy earlier can have some greater benefits.
Once an adult reaches their 50s, the annual insurance premiums they would pay on LTC insurance increase by 2% – 4% per year. Upon reaching their 60s, the rate jumps to 6% – 8% per year. Simply, the longer a person waits, the higher the premium.
Consider this: By the time extended is needed, insurance premiums, as well as the likelihood that an application will be rejected, become much higher. There are certain pre-existing health conditions that make it almost impossible to qualify for LTC insurance. Some of these conditions include AIDS and even dementia. It is better to take out an LTC insurance policy early to ensure that premiums remain low and limit the chance of the application getting rejected.
Regardless, some will worry about wasting money on insurance that they may never use. But, “long-term care insurance should be viewed the same as homeowners’ or auto insurance. You buy it to protect against a catastrophic loss that you hope never occurs,” says Bob Carlson of RetirementWatch.com.
What Are the Benefits?
Those who do not have LTC insurance have to pay the costs of care on their own.
LTC insurance can be very beneficial for those who have assets that they want to protect from the expensive costs of extended healthcare. Other notable benefits include:
Reducing the Cost of Long-Term Care – As evidenced by the annual median cost across the nation in 2019, long-term care can be extremely expensive. This is especially the case for middle-class individuals who do not have enough money to pay for long-term care out of pocket and are not close enough to the lower class to benefit from Medicaid.
Tax Deductions – Long-term care insurance can be another way for an individual who itemizes income tax deductions to reduce taxes. The amount of the tax deduction is contingent on the age of the insured. As of 2019, only premiums exceeding 10% of the AGI threshold were deductible.
Relieving Family and Friends of Caregiving – Should an individual need constant assistance but not have enough money to pay for long-term care, the caregiving responsibility falls onto the shoulders of family and friends. LTC insurance helps relieve the stress!
More Long-Term Care Insurance Info
If you’re looking for long-term care, start here!
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Originally published March 14, 2022
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