Long Term Care Insurance (LTCI) began just over 30 years ago, so it is a relatively new product in the insurance market. While only around 8% of Americans have purchased LTCI, rising life expectancies and senior care costs have interest in LTCI at an all-time high.
Long Term Care Insurance pays a specific daily benefit over a specific amount of time once certain conditions have been met, often fulfilling conditions like a policy holder’s inability to dress or care for themselves, an inability to keep up their home, or cook and prepare meals.
LTCI is meant to bridge the gap between quality long-term care and the financial shortfalls that often occur with prolonged care plans. According to a Harvard University study, 72% of Americans cross the poverty threshold after just one year of care.
The problem is further complicated because long term care is normally not covered under private medical insurance. Medicare only pays for skilled care after a three-day hospital stay and excludes custodial care, and the Medicaid only covers nursing home care after a patient’s assets have been depleted completely.
In recent Cost of Care Surveys, private nursing home care costs average $83,950, while 40 hours of in-home care averages approximately $57,000. LTCI is meant to offset these costs for the patient and their family whether the need for care is short term or long term.
The Benefits of Long Term Care Insurance
Long Term Care policies aren’t cheap, although those costs can be mitigated by purchasing policies at a younger age, and experts agree that they aren’t for everyone. No LTCI policy should exceed more than 7% of your annual income.
However, for the right person, a good LTCI policy can provide a lot of peace of mind and financial assistance during times that most families are left looking for creative ways to pay for the long term care that is needed.
A quality LTCI policy will do the following:
- Protect savings and assets
- Help maintain a policy holder’s financial independence
- Make professional care affordable
- Provide options for the kind of care provided
- Expand the range and depth of services available
LTCI premiums are calculated based on a few different factors.
Age and Health at the Time of Purchase: Just like any insurance, premiums are usually cheaper for younger policy holders as well as those who are healthier at the time of purchase. Most companies offer policies for clients between the ages of 18-85.
Benefit Period: The benefit period is the amount of time that the policy will pay out for long term care. This is usually stated in years.
Elimination Period: The elimination period is very similar to a deductible in health insurance. It is the amount of days that must be paid for before the LTCI policy kicks in. This is usually between 30-180 days. Longer elimination periods will lower the cost of premiums because it lowers the amount of care that the insurance company will ultimately be responsible for since many long-term care situations are shorter in duration.
The National Association of Insurance Commissioners recommends only purchasing policies from reputable companies that offer the following:
- A minimum of one year of nursing home health care coverage
- Coverage of Alzheimer’s disease and other degenerative diseases
- A guarantee that your policy won’t be canceled because of age or deterioration in physical, emotional, or mental health
- A 30 day free look period
- No hospitalization requirement to receive nursing or home health care