If you aren’t sure you have a good understanding of long-term care insurance, you aren’t alone. It can be a complicated insurance product. Making things even more complex, you have several options when it comes to buying a policy. You can choose a stand-alone, traditional long-term care policy, a hybrid life insurance/long-term care product, or even purchase an annuity with a long-term care insurance rider.
November has been designated as National Long-Term Care Awareness Month, so we thought it would be a good time to provide answers to some of the questions we hear most frequently.
What is Long-Term Care Insurance?
If you need skilled nursing care for more than a short period of time, those costs are generally not covered by Medicare or traditional health insurance plans. Unfortunately, Medicaid doesn’t kick in to help paying for care until you’ve spent the majority of your own assets first. This means that without long-term care insurance, you could find yourself spending the assets you’ve worked so hard to accumulate to pay for your own care.
And, long-term skilled nursing care is not cheap. According to Genworth’s annual Cost of Care Survey, the average national monthly cost for a private room in a nursing home is $8,365. It’s easy to see how months or even years of care could quickly deplete your savings. Long-term care insurance is designed to help you meet these expenses without exhausting your own asset reserves.
Who Should Consider Buying Long-Term Care Coverage, and When?
As with life insurance, the cost of long-term care insurance is based in large part on your age and your health. Unfortunately, too many people put off buying coverage until it’s too late – and too expensive – for them to do so. According to the American Association for Long-Term Care Insurance, the best time to buy a policy is when you are in your mid-50s. If you are in good health when you apply, you may be eligible for policy discounts. On the flip side, if your health is poor or if you are disabled, you will likely not be able to obtain coverage.
Are All Long-Term Care Policies the Same?
No! Traditionally, long-term care policies provided a set dollar amount per day, with options to limit the number of months or years the insurance company would pay benefits. You paid premiums to keep the policy in force. However, if you didn’t use the policy, neither you nor your loved ones got any benefit from it.
With a hybrid long-term care insurance policy, you’re actually buying an annuity or a permanent life insurance policy that includes long-term care benefits. If you don’t need long-term health care, your loved ones will still get policy benefits or annuity proceeds when you die.
Policy options are many and complex. When you work with a knowledgeable insurance professional, you can be confident they’ll help you find policy options designed to meet your specific needs and goals.