Insurance is a big part of our lives, and it’s essential to start investing in the right insurance plan as soon as possible. They’re beneficial for anyone looking for something that can protect them, their family members, business, or property from financial losses in case of an illness or an accident.
Different insurance plans are created to provide financial support for different situations. From medical emergencies to robberies, it’s possible to ensure just about everyone and everything.
Nevertheless, one of the most important typee of insurance is health insurance. That’s why there are multiple health insurance types people can choose from. Besides standard health insurance, you’ve most likely come across the term long-term care insurance before.
In this article, you can learn everything about this insurance type, such as what this insurance covers, and typical elimination periods before benefits can be used. Let’s get started.
What is long-term care insurance?
As people age, especially into their 60’s and 70’s they start to struggle with a deteriorating health conditions as they experience increasing illnesses and other health issues.
Long-term care insurance, often called LTCi, is a type of insurance that focuses on seniors and being able to help take care of themselves for things that are considered Activities of Daily Living (ADLs). And long term care insurance is a type of financial coverage that ensures that those who have it can receive the much-needed care for their ADLs in either their homes, a nursing care facility, an assisted living facility or really anywhere the care associated with ADLs is offered.
The primary purpose of this insurance type is to help individuals who have reached their retirement years spend them as comfortably as possible and get the help they need.
But challenges with Activities of Daily living don’t just occur for seniors. They can happen to anyone at any time. For example, if someone had a skiing or a motorcycle accident in their 20’s, and are unable to eat and go to the bathroom without assistance, may need long term care. And if they had a long term care insurance policy they would likely be able to use it to pay for the costs of care.
Depending on the details of the plan, long-term care insurance can cover a part of or total cost of the care treatment plan whether it’s at home or in a facility.
Finally, many people choose private long-term care insurance plans as they provide better benefits and more flexibility than public assistance programs that help with activities of daily living, such as Medicaid.
What health complications are covered?
In addition to covering the costs for custodial and personal care of senior residents who need regular assistance with everyday activities, individuals suffering from certain health complications can start receiving the same benefits before they reach the age of 65 if they have a long term care policy, so it’s good to know about aging and long term care.
A long-term care insurance policy can cover a wide range of chronic illnesses, disabilities, and injuries. In fact, anyone who develops a condition that prevents them from completing everyday tasks without any difficulties and has been paying regular monthly fees for this insurance plan can qualify for receiving the long-term care insurance benefits associated with their plan.
Here are some of the health complications not covered by long-term care insurance:
- Alzheimer’s Disease
- Amyotrophic Lateral Sclerosis (ALS)
- Kidney Failure
- Memory Loss
- Advanced Multiple Sclerosis
- Muscular Dystrophy
- Parkinson’s Disease
How does long-term care insurance work?
Applying for a long-term care insurance plan is similar to applying to any other kind of insurance program.
When a person wants to buy a long-term care insurance policy, they have to fill out an application form first, followed by answering some health questions. Today, you can do these interviews in person and over the phone. Depending on where you’re located and how busy you are, you may be able to choose between the two. There can also be a medical exam involved, too.
Additionally, your insurance agent will most likely ask to see your medical records and ensure you’re not already suffering from a critical health condition. That’s important because people who are already ill or have a disability usually can’t receive long-term care insurance benefits. For that reason, it’s crucial to decide on an insurance policy while you’re still healthy and before you start needing the coverage.
Once you’re approved for coverage by the American Association for Long-Term Care Insurance and your policy is issued, you start paying the premiums. The premiums vary depending on the amount of coverage you decide on and can financially afford to pay for regularly.
It’s important to mention that most long-term care policies require from its clients the inability to complete at least two out of six activities of daily living, also called ADLs, on their own to be granted the benefits of the insurance program. However, people with dementia or another cognitive impairment can also use the policy benefits.
The six activities of daily living are:
- Caring for incontinence
- Toileting (getting on or off the toilet)
- Transferring (getting in or out of a chair or a bed)
If you have been paying your monthly premiums and want to claim that you need care and assistance, your insurance company will review all the medical documents. It may even make you a medical screening appointment or send a professional nurse to do an evaluation. Once your insurer approves your care plan, the chances are your claim will also be approved.
When does long-term care insurance start paying benefits?
If your claim is approved and you need to start receiving the benefits of insurance, you’ve probably wondered about one question – when does long-term care insurance kick in?
Getting approved for long-term care insurance benefits is a big thing, so it’s only understandable this comes after a long and complex process. Even after spending weeks or months collecting all the required paperwork for yourself or your loved one, getting approved for benefits payment doesn’t mean you’ll instantly start receiving the benefits.
In fact, most policies come with an “elimination period”, which means people must pay for long-term care services by themselves for some time before the insurance benefits start disbursing. Each individual chooses their own elimination period when purchasing the policy. The standard elimination period times are 30, 60, and 90 days. However, they can also vary depending on your insurance plan. This will all be made transparent to the customer when they are picking out their policy type.
The waiting period is the same regardless of what type of care you receive. Whether you’re receiving the benefits in your home, an assisted-living facility, or a nursing home, the amount of time you wait (the elimination period) is the same regardless of where care help is received.
When choosing your insurance firm, you should get insight into how the waiting period is calculated across different insurance companies. For example, with policies with a calendar day elimination period, you can count your waiting period each day after receiving the benefits approval. But not all policies work like this, so make sure you discuss the details with your agent, and get it all in writing.
For policies with a service day waiting period, only the days with received care are counted. If a person needs assistance only three days a week, it can take more than seven months to reach the 90-day elimination period.
Moreover, the policy will typically begin the benefit payments after you receive the paid care for the period in question and keep them up until you reach the lifetime maximum.
For couples who invest in their long-term care insurance together, many insurance companies allow the spouses to share the total amount of coverage. In this situation, a person can use their spouse’s pool of benefits in case they reach the lifetime maximum on their policy.
Why buy long-term care insurance?
According to the latest data from the Administration for Community Living, a division of the US Department of Health and Human Services, almost 70% of 65-year-old US citizens require long-term care support or services at one point. Women require assistance and care for an average of 3.7 years, while men need it for 2.2 years.
As 70% is a quite large percentage, it can be said many seniors benefit from using their long-term insurance program at one point or another. What’s more, regular health insurance policies don’t even cover the need for long-term care. Other specialized public insurance programs such as Medicare don’t help either, as they cover only short home assistance and nursing homestays.
Long-term care insurance is the only insurance program covering custodial care, which includes supervision and assistance with everyday tasks. That might be the primary reason for deciding to purchase long-term care insurance. You can get the much-needed medical help, care, and assistance while keeping your financial independence, and not having to use your retirement savings to pay for care
The two key reasons for buying long-term insurance programs are:
- Protection of savings
Long term care is costly, and the elderly, whose only source of income is a limited retirement plan, might find they’re depleting their retirement funds quicker than intended. For people who don’t want to use up all their retirement funds, a long-term care insurance policy can give a helping hand and ensure seniors protect their savings.
- Focus on health
Although money can’t buy happiness, it can certainly buy high-quality medical care. The more money you invest in your medical care, typically the better results you’ll receive.
Fortunately, private insurance plans such as long-term care insurance offer you more funds and an increased amount of flexibility, so you can focus on health without worrying about your financial situation.
How much does purchasing long-term care insurance cost?
How much you’ll pay for a long-term insurance policy depends on multiple factors, and it’s impossible to give a universal answer that’ll fit everyone’s situation. Long-term care insurance statistics show that many of these factors are on an individual level, so each person has their unique insurance plan. You should also know what does disability insurance cover.
Let’s take a look at some important factors that can affect your long-term care insurance rates:
Typically speaking, the sooner you buy long term care insurance, the cheaper it’ll be. While, the older you get, the price for the same policy will gradually start to increase.
The same goes for health. Healthy individuals get better price deals on long-term care insurance policies. The price will again rise the more health problems you suffer from. Complex health conditions can even prevent you from getting approved for the a policy.
Women can typically expect to pay slightly more for their premiums because they live longer and thus have a better chance of making long-term care insurance claims than men. In the insurers eyes, they are a higher risk.
- Marital status
Insurance policies are typically lower for married people than single people, especially if couples choose to purchase long-term care insurance policies together. Some discounts do apply so be sure to ask your agent.
- Amount of coverage
The type of coverage also determines your insurance rates. Better coverage will cost more than basic coverage, and you’ll have to pay additional fees to gain access to premiums such as higher limits, shorter elimination periods, fewer restrictions, and protection against inflation.
- Insurance company
Identical insurance plans will fluctuate in price across different insurance companies. That’s why you should always compare prices from several companies and find the one that gives its clients the best deal. An insurance broker can help you with this.
Is long-term care insurance popular?
Looking at 2020 data provided by the National Association of Insurance Commissioners, it’s safe to say the popularity of long-term care insurance has plummeted over the last 20 years.
While more and more people are becoming aware of the uncertainty the future holds in for long term care insurance, many people decide are still deciding to protect their savings and invest in their health by purchasing a long-term care insurance policy.
As more people realize the importance of building a secure future for themselves, the popularity of long-term care insurance is only expected to grow bigger and bigger. Certainly the need for long term care is growing each day as the population grows and people age.
The bottom line
If you’ve been thinking about your senior years recently, you’ve undoubtedly wondered about what the right step for protecting your health and finances is. Well, there’s no better option than buying a long-term care insurance policy. If you’re 50 years old or older, now might be an ideal time to start investing in your future, so make sure to think wisely and make the right decision. Talking to a good financial advisor or specialist in Long Term Care Insurance can be a big help with that.
- The Administration for Community Living (ACL). (2020). 2020 Profile of Older Americans. Retrieved from acl.gov website:https://acl.gov/sites/default/files/Profile%20of%20OA/2020ProfileOlderAmericans_RevisedFinal.pdf
- American Association For Long-Term Care Insurance (AALTCI). (2020). Long-Term Care Insurance Facts – Data – Statistics – 2022 Reports. Retrieved from aaltci.org website: https://www.aaltci.org/long-term-care-insurance/learning-center/ltcfacts-2022.php
National Association of Insurance Commissioners (NAIC). (2021). NAIC 2020 Annual Report. Retrieved from naic.org website: https://content.naic.org/sites/default/files/annual_report_2020.pdf