Long-Term Care Insurance (Part #1)
One of the top questions from the WorkFlowRetirement mailbox is related to Long-Term Care Insurance. Many in our community are asking, what is Long-Term Care and should I have a policy? I’m also wondering, who is going to take care of me when I’m really old and cranky. According to my wife, I’m already old and cranky….
Great questions! The answer is complex and varies by individual. So, major headline here, everyone’s situation is different. Beyond reading my blog, I recommend working with an insurance broker to understand the different options/benefits of these policies and a financial professional to help you do a cost/benefit analysis.
Personally, I have spent many hours researching this topic, talking to insurance brokers, and analyzing the cost/benefit of these products. I will dedicate two posts on this important topic.
Part #1 - will focus on Long-Term Care and key questions to consider.
Part #2 - will focus on the pros and cons of these policies. Plus an added bonus, I’ll also share what decisions I have made along with some useful references I found.
So, yes, you’ll have to wait until Part #2 to find out my decision. Just hold on, the ride will be worth it.
Let’s get started. First, we’ll begin with a definition and some facts.
Long-Term Care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or a disability who cannot care for themselves for long periods. LTC is focused on individualized and coordinated services that promote independence, maximize patients' quality of life, and meet patients' needs over a period of time.
Some Interesting Facts from the U.S. Department of Health and Human Services
Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years.
Women need care longer (3.7 years) than men (2.2 years) - because they live longer.
One-third of today’s 65 year-olds may never need long-term care support, but 20 percent will need it for longer than 5 years.
In general, more people will require some type of LTC at home versus at a facility.
Medicare only pays for long-term care if you require skilled services or rehabilitative care - with the following limitations:
In a nursing home for a maximum of 100 days, however, the average Medicare covered stay is much shorter (22 days).
At home, if you are also receiving skilled home health or other skilled in-home services. Generally, long-term care services are provided only for a short period of time.
In other words, LTC provides extended care for someone who has a significant illness or disability and needs help with day-to-day activities. Also, most of us will need some type of long-term care in our lifetime.
So you are probably thinking, I need a Long-Term Care policy - right? Something to protect me (or my spouse) from a long-term illness that could wipe-out our retirement savings? I would say - it depends.
This fear of losing your retirement nest egg is the selling point of these policies. They are designed to cover (based on the policy) expenses that are incurred over a long period of time. But, it’s not that simple. These policies are complex and expensive. So, careful planning and consideration should be taken before purchasing one. I’ll share those considerations in the next post.
Here are 10 key questions to answer when considering a Long-Term Care policy:
What are the benefits of the policy? Specifically, what is the maximum daily benefit and is there a maximum lifetime benefit of the policy?
What type of expenses are covered? Anything not covered?
How long has the provider been offering Long-Term Care insurance?
What is the financial health of the provider?
Are the premiums fixed or variable? If variable, what are the average percentage increases over the last 10 - 15 years?
Does the policy adjust for inflation?
Is the policy a lifetime policy or a term policy (10, 20 years, etc.)?
Is there a waiting period before benefits begin?
Any pre-existing conditions not covered?
Does my family have a history of long-term illness?
You have probably discovered by now, this is not an easy decision. There are many factors to consider such as cost, the likelihood of needing the insurance, the viability of the provider, protecting your retirement savings, etc.
So stay tuned, in the next post I’ll lay out the pros and cons of LTC to help you make an informed decision. LTC like most insurance gives you a ‘piece of mind,’ but that comes with a cost that can be significant.
See you in Part #2…..