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. Some policies provide full coverage, so it is important to review all of the available options.

What’s the Cost?

The average annual cost of long-term care insurance varies, but generally, a single male might pay around $1,200, while a single female could pay about $1,900. Couples can expect to pay approximately $2,600 for a combined policy. These figures can increase if you opt for policies with inflation protection or other added benefits. The cost of your policy is based upon a number of factors. These often 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!
• Location: Long-term care insurance costs vary from state to state, with some areas having more competitive rates due to local market conditions.
• Policy Type: Different companies offer different pricing structures, so always shop around and research multiple policies and policy types to find a more budget-friendly option!

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. Certain pre-existing health conditions make it almost impossible to qualify for LTC insurance. Some of these conditions include:

• AIDS
• Dementia
• Parkinson’s disease
• Certain types of cancer
• Diabetes
• Heart disease
• Multiple sclerosis

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 without long-term care insurance must personally cover the substantial costs of care. LTC insurance can be invaluable for those seeking to protect their assets from the high expenses of extended healthcare. Here are some key benefits:

Reducing the Cost of Long-Term Care

• Rising Costs: The annual median cost for long-term care nationwide has surpassed $115,000, making it a significant financial burden for many.
• Financial Relief: LTC insurance can significantly reduce these costs, providing much-needed relief for individuals and families.

Tax Deductions

• Potential Tax Savings: For those who itemize deductions, LTC insurance premiums may be eligible for tax deductions.
• Eligibility Criteria: The specific tax benefits vary based on factors like the insured’s age and adjusted gross income (AGI).

Relieving Family and Friends

• Caregiving Burden: Caring for a loved one in need of long-term care can be emotionally and physically taxing for family and friends.
• Reduced Stress: LTC insurance can alleviate this burden by providing professional care, allowing caregivers to focus on their own well-being.

More Long-Term Care Insurance Resources

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