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Long Term Care Insurance 101

By: Ken Millhone, CFS* Investment Services Program Manager

Posted on 1/5/2021 7:51:31 AM

An older man sits at a table in his kitchen. A nurse is holding his finger, taking a blood sample to check his blood sugar

It can be difficult to think about a future where you’re not able to perform the daily tasks of living, but it’s a reality for nearly 70% of Americans over the age of 65. And if this happens to you, you’ll need a plan for how you’ll receive and fund long-term care. Despite the necessity to get help with your daily living activities, that type of care is not covered by health insurance.

That’s why supplemental long-term care insurance is so important for most Americans. You might be tempted to think, “oh that will never happen to me.” But, in the same way you pay for auto, house, and health insurance to cover unexpected expenses, it’s important to consider long-term care insurance to cover the unexpected expense of needing long-term care. Let’s take a closer look at what long-term care insurance is, what it covers, and if the cost is really worth it.

How Does Long Term Care Insurance Work?

Health insurance plans do not cover any type of long-term care, and once you’re on Medicare, the long-term care benefits are small and only offered under strict conditions. With long term care insurance, you pay a monthly premium and when you need care, you or your power of attorney will submit a claim for coverage.

Long term care insurance plans are really flexible. There are many different levels of coverage with different restrictions on the type of care that’s covered. Of course, the more coverage you want, the higher your premiums will be.

Most plans have what’s called an elimination period, which is usually somewhere between 30-90 days. Once you need care, you’ll have to wait out this period of time before you’re eligible to start receiving benefits. Usually, you’ll be reimbursed for the care you receive during that time.

What is Covered Under Long Term Care Insurance?

A nurse helps a woman use crutches in her home

The first and most important thing to remember about long-term care insurance is that you won’t qualify for coverage if you already have a debilitating condition. That’s why it’s important to start a plan ahead of time.

Once you have a plan, there is a range of assistance that long term care insurance can cover both inside and outside of the home, such as in a nursing home or assisted living facility. Coverage is based on your ability to perform what are known as ADLs, or activities of daily living. These include:

  • Getting in and out of bed
  • Eating
  • Dressing
  • Bathing
  • Caring for incontinence
  • Getting on and off the toilet

Most policies will begin coverage when you cannot perform two or more of the ADLs listed above. Once this happens, you or the person in charge of your care can then receive coverage for a variety of home health care, respite care (to give your primary caregiver a break), facility care, or specialized facility care such as an Alzheimer’s care facility. How much is covered or how much you or your caregiver will be reimbursed is dependent on the coverage plan you select.

Is Long Term Care Insurance Worth It?

To understand if long term care insurance is worth it, we need to look at the cost of plans vs. the cost of care. Depending on the type of care received, in-home or in a facility, the cost varies. The median cost of in-home care is around $4,000 a month and is generally the same for an assisted living facility, however nursing home care averages somewhere between $7,000-$8,000 per month.

The cost of long-term care insurance varies based on a number of factors, including your age and health. However, most plans are drastically cheaper than the care it can cover. On average, most plans range from $2,000 - $3,000 a year.

So, is long term care insurance worth it? Only you and your family can decide that for yourself, but on average, you’re looking at paying $2,500 a year for a plan that will help cover the cost of care at $48,000 a year. Again, these are averages, and you’ll need to speak with an insurance agent to understand the costs specific to you.

How Can I Get Long Term Care Insurance?

An elderly couple is sitting on a couch filling out paperwork

There are a few different ways to get long term care insurance. If your employer offers it, then you might qualify for discounted group rates, which can help you save money on your premiums. You can also search for plans independently and do some comparisons on your own. Finally, you can work with a financial advisor or insurance agent to help you sort through the options and find a plan that works best for you.

At Community First, we have financial advisors who can help you make investment decisions, including long-term care insurance. To start planning your future, contact us at 904.371.8076, select option 9.