Long term care insurance isn't a fun one to talk about. Honestly, it's kind of frightening to think about needing assistance as you age. I wanted to help clear up some of the many things to consider when it comes to long term care insurance!
Imagine 40, 50, 60 years from now… You've lived a long healthy life with your spouse. You saved for retirement and did a good job planning for all of your life goals. As you age however, you find that your spouse is needing more and more care as his or her memory starts to fade. You call your children and start to consider long-term care.
You see the prices for the different types of care and almost barf.
$3,700 per month for assisted living
$7,700 per month for a nursing home
$10,000 per month or more for hospice care
Luckily, your children find a long-term care policy that you bought from Becoming Financial in 2019.
You remember this dashingly handsome fellow Isaiah, and flashback to some of the questions you had.
1. How does it actually work?
Long term care insurance helps cover or offset the different needs of an in-home nurse, nursing home, and hospice care. When someone is in need of care they may only need help with the laundry or they may need constant supervision. The range in care will determine the costs.
2. When does it start? Is it my occupation or any?
Long term care insurance starts when the insured cannot perform 2 or more of the 6 activities of daily living - aka - ADLs.
- Eating and/or Cooking
- Getting Dressed or Undressed
- Transfer (Get up from bed or couch to go somewhere)
- Continence (Holding One's Bladder)
- Toileting (Actually using the bathroom)
Typically if one fails 2 or more of these ADL's for 90, 180, or 360 days, then a doctor's note would allow the insurance claim to start.
It's not like disability insurance where it looks at your ability to do a job function, it's focused on the ADLs.
3. How much does it cover?
It's totally up to the insured and policy holder how much coverage they would like, based on the premiums they are willing to pay. You could pay lower premiums and get $500/month of benefits, or for a heftier price, you could get $10,000 or more of monthly benefits with inflation protection.
4. Who pays for it?
Someone who has some sort of financial responsibility or familial obligation. The insured and owner could be the same person, or a spouse or family member could take out the coverage.
5. How long does it last?
In the early 2000's there were policies that had unlimited benefits. Meaning that if someone was in a nursing home for 20 years the benefits could keep paying out. In 2019 the plans usually range from 1-5 years. The average long-term care event is usually about 3.5 years.
6. Are there caregiver benefits?
Some policies do have an allowance for caregiver training or allow for the payments to supplement time missed from work for a primary family caregiver. It's best to read the fine print and work closely with an advisor to find the right type of policy based on your concerns.
7. Are there cost of living adjustments?
30, 40, 50 years from 2019 things may cost double what they did in 2019 for long term care needs. Some policies will allow for the cost of living adjustments (COLA) to determine the final benefits. COLA does cost some additional premium though, it's usually added on as a "rider" to the contract.
8. What are the pros and cons?
Pros - Can offset or completely cover LTC needs | Can protect your savings | Reduces risk and worry
Cons - You may never actually use it | Typically expensive, and usually last on a long list of things to pay for
Overall, I highly recommend looking at and understanding LTC policies. One of my favorite types of policies nowadays are hybrid life or annuities that function like a regular contract, but allow you to pull from the death benefit or account value for LTC needs tax free.
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