If you are wealthy, you will be able to afford help in your home or care in an assisted living facility or nursing home. If you are poor, you can turn to Medicaid for nursing homes or in-home aides. But if you’re middle class, you’ll have to make a thorny decision: buy long-term care insurance. It’s a more complex decision than for other types of insurance because it’s very difficult to accurately predict your finances or health for decades to come.
What is the difference between long-term care insurance and health insurance?
Long-term care insurance is for people who may develop permanent cognitive problems such as Alzheimer’s disease or who need help with basic daily tasks such as bathing or dressing. It can help pay for personal assistants, adult day care, or institutional housing in an assisted living facility or nursing home. Medicare does not cover such costs for the chronically ill.
How does it work?
Policies generally pay a flat rate per day, week, or month; say, up to $1,400 per week for home care aides. Before purchasing a policy, ask what services it covers and how much you pay for each type of care, such as a nursing home, assisted living facility, personal home care service, or adult day care. Some policies will pay family members who provide care; Ask who qualifies as a family member and if the policy pays for her training.
You should check if and by how much benefits increase to account for inflation. Ask about the maximum amount the policy will pay and whether benefits can be shared by a common-law partner or spouse.
How much does it cost?
In 2022, a 60-year-old man buying a $165,000 policy would typically pay about $2,525 a year for a policy that grew 3 percent annually to account for inflation, according to a survey by the American Health Care Insurance Association. Long term. , to nonprofit organization that tracks insurance rates. A woman of the same age would pay $3,300 for the same policy because women tend to live longer and are more likely to use it. The higher the inflation adjustment, the more the policy will cost.
If a company has been paying more than expected, it is more likely to increase rates. Companies need approval from their state regulators, so find out if the insurer is asking the state insurance department to raise rates over the next few years (and, if so, by how much), since companies They cannot increase premiums without permission. You can find contacts for your state’s insurance department through Directory of the National Association of Insurance Commissioners.
Should I buy it?
It’s probably not worth the cost if you don’t own your home or have a significant amount of money saved and won’t have a sizeable pension beyond Social Security. If that describes you, you’ll probably qualify for Medicaid once you spend what you have. But the insurance may be worth it if the value of all your savings and possessions, excluding your primary home, is at least $75,000, according to a consumer guide of the association of insurance commissioners.
Even if you have savings and valuable things you can sell, you should think about whether you can afford the premiums. While insurers cannot cancel a policy once it has been sold to you, they can (and often do) increase the premium rate each year. The group of insurance commissioners says it probably You should consider coverage only if it is less than 7 percent of your current income and if you can still afford it without pain if the premium were to increase by 25 percent.
Many insurers sell hybrid policies that combine life insurance and long-term care insurance. They are popular because if you don’t use the long-term care benefit, the policy pays the beneficiary after your death. But compared to long-term care policies, hybrid policies “are even more expensive and the coverage is not great,” said Howard Bedlin, director of government relations and advocacy at the National Council on Aging.
When should I buy a policy?
Wait too long and you may have developed medical conditions that make you too risky for any insurer. If you buy too soon, you may be diverting money that would be better spent on your retirement account, your children’s tuition, or other financial priorities. Jesse Slome, executive director of the American Long-Term Care Insurance Association, says the “sweet spot” is when you’re between 55 and 65. Younger people often have other financial priorities, he said, which make premiums more painful.
When can I take advantage of the benefits?
Make sure you know what circumstances allow you to benefit. That’s known as the “trigger.” Policies often require proof that you need help with at least two of the six “activities of daily living,” which are: bathing, dressing, eating, being able to get out of bed and move around, continence, and being able to come and go. use the bathroom. You can also take advantage of your policy if you have a diagnosis of dementia or some other type of cognitive impairment. Insurance companies will usually send a representative to perform an evaluation or request an evaluation from your doctor.
Many policies will not start paying until you have paid out of pocket for a set period, such as 20 or 100 days. This is known as the “elimination period.”
Jordan Rau is a senior reporter for KFF Health News, part of the organization formerly known as the Kaiser Family Foundation.
