Is Long Term Care Insurance Really The Solution?
The cost of long term health care is rising; making it essential that seniors protect themselves. But how? If you are worried that the costs of long term care may eat away at your life savings you may consider a long term care insurance policy, but is long term care insurance really the solution?
What Is Long Term Care Insurance?
You already have medical insurance and maybe even Medicare, so you don’t need long term care insurance, right? That may not be true particularly if you cannot qualify for medicaid. In most cases medical insurance only pays for medical problems, not necessarily long term care. Medicare limits the number of days a patient qualifies for nursing home care and the kinds of in-home care available. Long term care insurance is a way to bridge the gap between what regular health insurance and Medicare pays and the services an elderly patient may actually need.
What Does Long Term Care Insurance Cover?
The types of coverage available fluctuate depending on the plan a patient has. Most plans do pay a percentage of both nursing facility care and in-home care. In some instances, they will pay for a combination of both. The average plan usually has limits to either the dollar amount a subscriber can spend on services, or the number of days he policy will cover for nursing care facilities.
Long term care insurance usually does cover the following in some manner:
· in patient nursing care facility
· assisted living facility
· in-home nursing care
· in-home physical and occupational therapy
· in-home personal services aid (bathing, cooking, etc)
How Much Does Long Term Care Insurance Cost?
The rates for long-term care insurance vary based on a number of factors including how much does assisted living cost in your area. According to the American Association for Long-Term Care Insurance, the average annual cost for an individual age 55 is $2,007. For Americans who wait to buy a policy, it gets harder to qualify for coverage, as the cost increases with age and underwriting standards become stricter. But without long-term care insurance to help pay for long-term care services, many older adults find the cost of long-term care unaffordable.
Who Qualifies for Long Term Care Insurance?
Just about anyone can find an insurance company willing to write up a long term care policy – for a price. Even seniors in their 60’s and 70-‘s can get a policy; of course the premiums are often cost prohibitive.
In most cases, the younger you are when you secure a long term care policy the better rate you can get. Although rates will increase over the years, if you shop around you may be able to find a policy that holds rates for a certain length of time, with pre-approved increases that you can expect.
Anyone with a preexisting condition may be turned down for a policy altogether. Or worse yet, be issued a policy that specifies what conditions they will not pay for. This can be dangerous for subscribers since an insurance provider can find a way to link almost nay stay to a preexisting condition; this refusing to pay for the care specified.
The absolute best time to secure a policy is in your 50’s while you are young enough to enjoy increased savings and your health is still good enough to keep health-related increases from occurring.
When Long Term Care is a Good Option –and When it Isn’t
Long term care coverage can be a good option for someone who is young enough to secure a reasonably priced policy or who can get a group policy through their employer. When you are able to get a solid plan for a fraction of the cost of other health plans, then by all means consider this insurance option.
Be wary though. Not every long term care insurance policy is worth the money. Check your policy carefully for limitations on accrued costs and restrictions on the type of care provided. For instance, many policies state that a patient must fall within certain criteria in order for the policy to begin paying. This may include an inability to perform certain tasks. If the patient suffers from a condition like Alzheimer’s they may be physically able to perform the tasks listed, but mentally incapable of it. In this case, the policyholder may discover that the insurance company will not pay for services due to the physical ability shown.
Are There Other Options? Consider a Life Settlement – selling your life insurance for cash
When having the financial resources available to fund long-term care services is a problem, or when the policy options available do not meet the buyer’s need a life settlement may be a better option to consider. Otherwise known as reverse life insurance, this type of settlement allows the patient to sell a life insurance policy and use the proceeds for long term care. Since a life insurance policy is considered transferable property, a policy owner has the right to sell the policy to another party. Universal life, whole life, adjustable, variable, survivorship, and convertible term life insurance policies generally qualify for a life settlement transaction. Even a portable group life policy could potentially qualify.
In a life settlement transaction, the policyholder sells his or her life insurance policy to a life settlement broker or company for a lump sum payment – usually for an amount higher than the policy’s current cash surrender value, but less than the full death benefit. The investor becomes the owner and beneficiary and assumes the responsibility for paying the premiums.
The amount of the offer a policy owner receives depends on the type of life insurance policy, amount of the death benefit, and expected rate of return to the investor. Policies that involve lower premiums and a shorter life expectancy of the insured usually have higher value.
Figuring out how to pay for long term health care costs isn’t always easy. With nursing home care costing tens of thousands of dollars a year, seniors need to make important decisions regarding their future care before illness strikes and they are forced to make a quick decision.
While long term care insurance may look good on the surface it does have some pitfalls that consumers will want to avoid. Be sure to consider all of your options carefully before making your final decision.