Hesitant to buy long-term care insurance? These are what most insurers don’t tell you.
What is long-term care insurance?
Long-term care insurance is a type of coverage that helps you cover expenses should you suffer from either a chronic illness, disability or impairment and need assistance.
One thing to note is that this insurance is different from traditional medical care since it includes services that might not be paid by health insurance. There are two levels of services that long-term care insurance might provide:
* Personal care: This is the most basic level of long-term care insurance. It might entail assistance with six routine activities known as the ADL – activities of daily living. These include bathing, eating, dressing, continence, and walking. Usually, people can choose to receive these services at home, at a health care center or a nursing home.
* Skilled care: This refers to any healthcare services that involve medical professionals like nurses or therapists. These services are often provided at a nursing home or healthcare center rather than a private house.
Who should buy long-term care insurance?
Most people purchase insurance when they are 55-65, with about 55%, while the figure for those over 66 is 18%. Experts suggest that the suitable age to buy this type of insurance is from 55 to over 65. This is because people are more prone to chronic diseases or cognitive impairment at this time of their life, such as Alzheimer’s. Given that the insurance provides personal care, many people plan to buy a policy because they don’t want to burden their family when they get old.
How much does a long-term care insurance plan cost?
This might be the part most people care about. The average rate for a 55-year-old male is $950, and the rate for a female is $1500.
Factors affecting the cost
The rate of long-term care insurance might vary depending on a variety of factors as follows:
- Age and health condition: As you get older, you are more vulnerable to more health problems. This means that you have to pay more when you buy a policy. It is noticeable that you might not be qualified to buy the insurance if your health is critical.
- Sex: Women usually have to pay more than men since they are supposed to have more extended longevity.
- Marital status: There are many policies offered for couples, including a certain number of discounts. The policy can be applied to a husband and a wife, mother and child, or two related adults.
- Insurer: Though the cost of long-term care insurance in different companies and agents might vary, their services and benefits are the same. Thus, be sure to check with several companies and agents before making the final decision.
Things that insurers won’t tell you
One thing to know is that this kind of insurance might not be for everyone. The latest statistics reveal that a 55-year-old couple, each purchasing an initial benefit of $165,000, might have to pay the sum of about $2,080. Since this rate might increase with the interest benefits, you should not buy a policy if you are not sure that you can afford the premium for the rest of your life, as all your investment would be futile.
Many insurers will explain how premiums can be cheaper if you buy a policy when you are young. However, there is a likelihood that you might have to pay for the coverage some years before you need it. So, make sure to contemplate this carefully.
Where to buy long-term care insurance?
Long-term care insurance is available in different forms. You may want to buy an individual policy from a private agent, an insurance company or even a broker.
There might be other options available to you. However, be alert to insurance companies with celebrity endorsements since those celebrities are often offered a lucrative rate to advertise the policies without knowing much about them.
Another option is to register for coverage with a group policy through your employer or association membership. In fact, many companies offer group long-term care policies or purchase an individual policy at discounted group rates. In many cases, these do not include any underwriting, which means there’s a possibility that you don’t have to meet medical requirements to qualify. Some companies even allow family members to register for the policy, with the condition that they must pay premiums and pass medical check-ups.
For those who are buying long-term care insurance, there are few things that you may need to check before paying the bill.
- Understand what your contract covers and does not cover. Make sure that you understand everything that is and isn’t included in your contract. If not, don’t hesitate to ask your insurer for clarification.
- Understand how the agent or company defines ADL and the disabilities in the policy. There are always lists of illnesses and disabilities and the following conditions that a policy will cover. You need to understand the requirements that make you qualify for care and evaluate if these are reasonable or not.
- Check the company’s increased rate history. It is noteworthy that the insurance cost might change over years for several reasons, whereas your income might go down. Thus, it is necessary to ask your insurers about their rate history and check if they have increased the rates.
- Be sure that your policy has inflation protection. Sometimes, the cost of your insurance might rise as a result of inflation. As your contract includes inflation protection, your benefit will increase as the rate goes up.
Frequently Asked Questions
How does a Long-Term Care Insurance Policy work?
Long Term Care Insurance can be very flexible. You can choose to buy plans that provide coverage for a specific “term,” for example, 3 years or 5 years. You may also want to purchase coverage worth $50,000 to $300,000 and then draw the money later. Some companies will offer plans with an unlimited lifetime benefit, though this might be the most expensive option.
What is often not covered in Long-Term Care Insurance Policies?
Most insurers will reject to remunerate benefits for the following:
– mental or nervous disorders or diseases (except for Alzheimer’s or the other dementia)
– drug or alcohol addiction
– illness or injury caused by an act of war
– attempted suicide or intentionally self-inflicted injuries
– treatment the government has provided in a government facility or already paid for
Will there be a guaranteed cost?
Theoretically, premiums will stay the same regardless of the policyholder’s health status or age. However, if the premiums become higher than what was previously planned, the insurer may increase premiums for the entire class of policyholders.
Am I still qualified for a policy if I have pre-existing conditions?
Depending on your health conditions, insurance companies will decide if you can apply for a policy or not. Some companies will still sell a plan with a surcharge, though. Of course, these plans are costly and often lack flexibility.
Can I renew my Long-Term Care Insurance Policy?
Yes, most companies nowadays allow policyholders to renew their policies. However, we do not always recommend this. This is because by the time your policy ends, your age increases, and you may suffer from new health problems. This means that you will need to pay a higher amount of premium for your renewed policy.
When am I eligible for benefits? (Benefit triggers)
You must know about situations in which you can start to benefit from your policy. After all, it’s you who pay a whole fortune for it. This is often called benefit triggers. In a sample contact, you may find the benefit triggers in a section called “Eligibility for the Payment of Benefits” or “Eligibility for Benefits.” Two common benefit triggers are Activity of Daily Livings – ADLs and Cognitive Impairment.
– ADLs: ADLs are referred to by most companies as bathing, continence, dressing, eating, toileting, and transferring.
When you are unable to do some of the ADLs, you are qualified to receive the benefits. For example, when you cannot eat and get dressed by yourself (two of six). In some cases, some insurers will require more ADLs, which makes it harder for you to claim your benefit. Knowing about this will make you more careful when considering a policy.
Some insurance companies may require you to have someone help you with the activities called hands-on assistance. This means that you need to have someone to help you, in contrast to stand-by assistance. Remember to check this very clearly in your policy to avoid any confusion later on.
– Cognitive impairment: When you are diagnosed with Alzheimer’s or other dementia symptoms, you can file a claim to your insurer to get your benefits.
When do benefits start? (Elimination or Waiting Period)
You have to wait until you can get your benefits will depend on the elimination (waiting) period that you choose when purchasing your plan. Usually, it will take from 60-90 days. A shorter period means that you will benefit from your plan earlier, though it also means that your policy can be more expensive.
Note: You don’t need any prior hospitalization to claim your benefits.
What is the “Waiver of Premiums” in Long Term Care Insurance Policy?
“Waiver of Premiums” is a common feature in Long Term Care Insurance Policy. It allows you to stop paying your premium when your insurer has started to pay the benefit. Insurers may waive the premium when they make the first benefit payment or wait until the end of the elimination period.