Long-term Care Insurance Basics: What It Covers. How Much It Costs.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Long-Term Care Insurance Covers

Long-term care insurance (LTCI) helps cover the cost of services like in-home care, nursing home care, and assisted living for individuals who need assistance with daily activities due to chronic illness, disability, or old age.

Types of Long-Term Care Insurance Policies

  1. Reimbursement Policies: Cover actual expenses up to policy limits.
  2. Indemnity Policies: Provide a fixed daily or monthly benefit.
  3. Partnership Policies: Protect assets for Medicaid eligibility.

Long-Term Care Insurance Cost

For a 60-year-old nonmarried healthy male, the estimated monthly premium for long-term care insurance varies based on the coverage and benefit period. A policy providing $5,000 per month of coverage for five years costs approximately $123.94 per month. Alternatively, a policy offering $3,000 per month of coverage for three years costs around $74.36 per month.

Average Cost By Age

AgeAverage Annual Premium
50$2,500 – $3,500
55$2,800 – $4,000
60$3,200 – $4,500
65$4,000 – $5,500
70$5,000 – $8,000
75$7,000 – $10,000+

Long-Term Care Insurance Pros and Cons

Pros:

  • Financial protection
  • Access to quality care
  • Flexibility in care options
  • Peace of mind

Cons:

  • High premiums
  • Possibility of non-use
  • Limited benefit periods
  • Exclusions and limitations

Eligibility and Disqualifiers

Common disqualifiers include severe or chronic illnesses, cognitive impairments, severe disabilities, advanced age, and overall poor health. Specific pre-existing conditions such as Alzheimer’s, Parkinson’s, multiple sclerosis, stroke, AIDS/HIV, and certain cancers can also result in denial of coverage.

Long-Term Care Insurance Can Pay For These Services And Facilities

The insurance pays for both formal and informal care that includes the following:

Common Exclusions and Limitations

  • Pre-existing Conditions: Like life insurance policies, LTCI may exclude coverage for pre-existing conditions or require a waiting period before coverage begins.
  • Mental Health Conditions: Certain mental health conditions, such as Alzheimer’s disease or other forms of dementia, may not be covered or may have specific limitations on coverage.
  • Maximum Benefit Periods: Most long-term care insurance policies have maximum benefit periods, which cap the time you can receive benefits. It’s important to consider whether the benefit period you choose will be sufficient to cover your potential care needs.
  • Elimination Periods: LTCI policies often include an elimination period, a waiting period before benefits begin. During this time, you’ll be responsible for covering care costs. Choosing a more extended elimination period can lower your premiums but may also increase your out-of-pocket expenses when you need care.

Who Should Get Long-Term Care Insurance?

Those between 55 and 85 are ideal candidates for LTC insurance, as it allows them to secure coverage without depleting their assets. LTCI is designed to help protect one’s assets and savings from being used to pay for care. Here are some other examples of people who need LTCI.

  1. Individuals with a Family History of Chronic Illnesses: If there’s a history of chronic diseases like Alzheimer’s, Parkinson’s, or other debilitating conditions in your family, you might be at a higher risk of needing long-term care.
  2. Those Without Family Caregivers: Long-term care insurance can be beneficial if you don’t have close family members who can care for you in your old age or are not equipped to provide the care you might need.
  3. People with Assets to Protect: If you have significant assets that you want to preserve as an inheritance for your heirs, long-term care insurance can help protect those assets from being depleted by the high costs of long-term care.
  4. Individuals Who Value Independence: Insurance can ensure you get professional care without burden if you value your independence and don’t want to rely on family or friends for care.

Best Long-Term Care Insurance Companies

Multiple insurance companies offer good policy benefits and reasonable monthly premiums:

  • Global Atlantic: Offers a fixed annuity providing long-term care benefits, flexible coverage, and guaranteed returns.
  • OneAmerica: Provides asset-based long-term care solutions with Asset Care, Lifetime Benefit riders, and joint coverage options for couples, combining life insurance with long-term care benefits.
  • Mutual of Omaha: A long-standing leader in long-term care insurance, offering comprehensive coverage, various discounts and incentives, and exceptional customer service.
  • Nationwide: Provides a range of long-term care insurance products, features a Care Concierge program, and firmly commits to financial stability and customer satisfaction.
What Is Long Term Care Insurance? How Does Long Term Care Insurance Work? What Disqualifies From Long-Term Care Insurance?

Tips For Finding The Best Deal

Now that you know the different places to purchase long-term care insurance, you may wonder how to find the best deal. Here are a few tips to help you get started:

  • Shop around and compare prices. This is one of the best ways to find a good deal on any insurance policy. Be sure to compare prices from a variety of different companies.
  • Check with your employer. Many employers offer long-term care insurance to benefit their employees, so check with your human resources department to see if this coverage is available.
  • Research government programs. As a senior citizen, you may be eligible for long-term care insurance through the government. The federal government offers the Long-Term Care Insurance Program (LTCIP) program to anyone over 55 who meets specific health requirements.
  • Check with your veterans’ benefits office. If you are a veteran, you may be eligible for long-term care insurance through the Department of Veterans Affairs (VA).

Long-Term Care Insurance Alternatives

  • Self-Funding: Some individuals self-fund their long-term care expenses by setting aside savings or investments. This approach may suit those with significant financial resources or who are comfortable considering potentially high out-of-pocket costs.
  • Life Insurance with Long-Term Care Riders: Another option is to purchase a life insurance policy with a long-term care rider. This allows you to access a portion of your life insurance death benefit to pay for long-term care expenses while still providing a death benefit to your beneficiaries if you don’t use the entire amount for care.
  • Annuities with Long-Term Care Benefits: Some annuities offer long-term care benefits, allowing you to use a portion of your income to cover care expenses. This option may appeal to those already considering an annuity for retirement planning.
  • Health Savings Accounts (HSAs): If you have a high-deductible health plan (HDHP), you may be eligible to contribute to a Health Savings Account (HSA). HSA funds can be tax-free for qualified medical bills, including long-term care expenses.
  • Medicaid and Other Federal Government Programs: For those who meet the eligibility requirements, Medicaid provides coverage for long-term care, including nursing home care and some home and community-based services.
  • Life Settlements: Selling a life insurance policy for immediate cash to cover care costs.
  • Home Equity: Using home value through reverse mortgages to fund care.

Hybrid Long-Term Care Insurance

Combines long-term care coverage with life insurance or an annuity, providing financial protection for medical expenses and death benefits.

Key Features

  • Hybrid Life Insurance: Combines term and permanent life insurance, providing a death benefit and potential cash value.
  • Long-Term Care Annuity: Covers long-term care costs while safeguarding assets.

Benefits

  • Dual benefits for care and death
  • Financial security with tax advantages
  • No “use it or lose it” scenario

Ideal For

Those with significant savings and seeking flexibility and guaranteed benefits.

Traditional vs. Hybrid Long-Term Care Insurance

Traditional Long-Term Care Insurance

  • Coverage: Stand-alone policy for long-term care expenses.
  • Cost: Lower initial premiums but may increase over time.
  • Unused Benefits: No return of premiums if care is not needed.

Hybrid Long-Term Care Insurance

  • Coverage: Combines long-term care insurance with life insurance.
  • Cost: Fixed premiums, higher upfront costs.
  • Unused Benefits: Provides a death benefit to heirs and often includes features like return-of-premium.

Key Considerations

  • Flexibility: Hybrid policies offer more flexibility and ensure some benefit is received.
  • Cost: Traditional policies can be more affordable initially.

Why Use an Independent Long-Term Care Insurance Agency Like The Annuity Expert?

Advantages

  • Unbiased Advice: Independent agencies offer impartial guidance, comparing multiple insurers to find the best policy for your needs.
  • Comprehensive Selection: Access to various policies and carriers, ensuring tailored solutions.
  • Expert Knowledge: We are LTC certified and specialize in long-term care insurance, providing in-depth understanding and personalized recommendations.
  • Ongoing Support: Continuous assistance with policy management and claims.

What We Recommend

Long-term care insurance is a critical component of a comprehensive retirement plan, especially for those concerned about protecting their assets and ensuring quality care. Whether you opt for traditional, hybrid, or alternative long-term care solutions, understanding your options and making informed decisions will provide peace of mind and financial security.

If you have further questions or need personalized advice on long-term care insurance options, contact us for free advice or a quote.

How Much Does Long Term Care Insurance Cost?

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Questions From Our Readers

What is the best elimination period for long-term care Insurance?

According to industry experts, the best elimination period for LTCI is typically between 90 to 180 days. This time allows the policyholder to receive the maximum benefits from their policy while still having the lowest possible premiums.

What happens if you run out of money for long-term care insurance?

A few options are available if you run out of money for LTCI. First, you may be eligible for government programs such as Medicaid, which can help offset long-term care costs. Additionally, you can look into other forms of financing, such as reverse mortgages, life settlements, insurance policy loans, or other forms of private funding.

What does long-term care insurance not cover?

Long-term care coverage does not apply to care provided by family members, medical care costs, daily benefit amounts, regular health insurance costs, home care-only services, activities of daily living, homemaker services, and policies based on health history. In addition, LTCI does not cover end-of-life expenses, including hospice or burial costs.

Do long-term care insurance premiums increase as you age?

Yes, premiums generally increase as you age. When purchasing a policy, younger individuals typically pay lower rates since insurers consider them lower risk. As you age, the risk of requiring long-term care services increases, leading to higher premiums. Other factors that impact monthly premiums are age, gender, marital status, and health.

Is long-term care insurance worth it?

The Federal Government predicts that 7 out of 10 retirees above 65 will need some long-term care in their lifetime. Unfortunately, long-term care is not covered by regular health insurance. Medicare will not help either. Covered care only includes short stays in nursing homes or rehab, not custodial care.

Does long-term care insurance cover hospice?

Yes, LTCI typically covers hospice care. Hospice care provides comfort and support for terminally ill patients. Coverage specifics vary by policy, so reviewing individual policy details is essential to determine the extent of hospice care coverage.

Does long-term care insurance cover in-home care?

Yes, LTCI often covers in-home care. This allows policyholders to receive care in the comfort of their homes. However, coverage details can vary, so checking individual policy terms is crucial to understanding the in-home care benefits provided.

Can a long-term care insurance policy cover both my spouse and me?

Yes, many providers offer “shared care” policies. These allow couples to share a combined pool of benefits, covering both spouses under one policy. This can provide flexibility in how the benefits are used between the two individuals.

Does long-term care insurance cover independent living?

Typically, long-term care insurance does not cover the costs of independent living or retirement communities. However, it can cover services received within those settings if they qualify as long-term care, like home health care. Policies vary, so it’s essential to review your policy’s specifics.

Does long-term care insurance cover assisted living?

Yes, most policies cover assisted living facilities, as they fall under the category of long-term care services. The amount and duration of coverage depend on the policy’s specifics. Always review your policy details to understand the extent of coverage.

What are the advantages and disadvantages of long-term care?

The advantages include comprehensive coverage for various care services, inflation protection, and potential tax benefits. The disadvantages include potentially rising premiums over time, a “use-it-or-lose-it” policy where unclaimed premiums are forfeited, and sometimes limited coverage on certain services.

Why might a younger person buy long-term care insurance?

Purchasing long-term-care insurance at a younger age can be a savvy financial decision. Premiums tend to be lower, allowing younger individuals to lock in favorable rates.

Is there an age limit to purchasing long-term care insurance?

Many insurance companies have age limits for new long-term care policies, typically around 75-85. However, some providers may make exceptions based on an individual’s health and lifestyle.

What is the best time to buy long-term care insurance?

The age factor plays a vital role in the cost. Generally, younger buyers can secure more favorable rates. However, according to industry experts, the best time to buy long-term care insurance typically lies in your mid-50s to mid-60s.

What triggers a long-term care insurance policy?

Many long-term care policies have a “loss of independence” trigger. Your policy benefits will be activated if you require assistance with a specified number of ADLs. Some policies include a specific cognitive impairment trigger, such as a diagnosis of dementia or Alzheimer’s disease. Once this trigger is met, the policy benefits kick in. A common requirement is a physician’s certification stating that you need long-term care due to a chronic illness or disability. This certification is often necessary to initiate the benefits.

What is the federal long-term care insurance program?

The United States Federal Long-Term Care Insurance Program (FLTCIP) is a voluntary insurance program available to federal employees, including uniformed service members and qualified relatives. The program provides an essential safety net that helps cover the costs of long-term care services.

Does long-term care insurance pay family caregivers?

The answer varies depending on the policy. Some policies cover care family members provide, although typically with certain restrictions and conditions. For instance, the family member may need to be a licensed caregiver, or there may be limits on the compensation amount.

Who are the best candidates for self-funding long-term care costs?

Individuals with significant savings or assets, a stable income, and limited reliance on government assistance are the best candidates for self-funding long-term care costs.

What’s the cost of long-term care insurance at age 60?

At age 60, assuming you’re in good health, you might pay around $3,000 per year or $250 per month.

How much does long-term care insurance cost for a 65-year-old?

The cost of long-term care insurance for a 65-year-old varies depending on several factors, including their health, the coverage amount, and the duration. On average, premiums can range from $2,000 to $5,000 annually. It is recommended for individuals to obtain personalized quotes from insurance providers to get an accurate estimate.

How much is long-term care insurance for a 75-year-old?

The cost of long-term care insurance for a 75-year-old varies depending on factors like health, coverage amount, and policy options. A 75-year-old can expect to pay around $5,000 to $10,000 annually for long-term care insurance. However, getting personalized quotes from insurers is recommended for an accurate estimate.

What’s the cost of long-term care insurance at age 77?

Long-term care insurance costs are higher at age 77 due to the increased risk associated with age. Premiums can reach up to $6,000 per year, equivalent to $500 monthly.

What is the average cost of long-term care insurance?

The average cost of long-term care insurance varies depending on several factors, including the insured’s age, health, and desired level of coverage. However, on average, the annual premium can range from $1,500 to $3,500.

Is it too late for my wife’s aunt, who is 89 and on the border between assisted living and nursing care, to buy long-term care insurance?

Generally, it is too late to purchase long-term care insurance at the age of 89, especially if she is already in need of assisted living or nursing care. Most long-term care insurance policies have age limits, often around 85, and require underwriting based on health status. Additionally, pre-existing conditions and the current need for long-term care services usually disqualify individuals from obtaining new policies.

Can I purchase long-term care insurance for someone 83 years old?

Options are very limited. However, you can purchase a single-premium simplified-issue life insurance policy with a long-term care benefit.

What is the difference between reimbursement and indemnity long-term care insurance?

The main difference between reimbursement and indemnity long-term care insurance is their benefit payout methods. Reimbursement policies cover the actual costs of eligible long-term care services, reimbursing you for expenses up to a certain limit based on submitted receipts. In contrast, indemnity policies pay out a predetermined daily or monthly benefit directly to you, regardless of the actual expenses, offering more flexibility in how the funds are used.

Are long-term care (LTC) benefits that exceed the expenses incurred considered taxable income?

Typically, long-term care insurance policies are structured on a reimbursement basis, meaning they reimburse for actual expenses incurred up to a certain limit, which helps prevent receiving excess benefits. In this common arrangement, there wouldn’t be excess benefits over the cost of care. However, the excess amount may be taxable if your LTC benefits exceed this cap.

Why might choosing private long-term care insurance be preferable over employer-provided one?

The main advantage of private long-term care insurance is its portability. A private policy remains in effect regardless of your employment status or changes in your career. This means that if you switch jobs, retire, or become unemployed, your coverage continues uninterrupted as long as you pay the premiums. In contrast, employer-provided long-term care insurance typically ends when you leave the company.

My husband and I are 74 and 73, respectively, and are in excellent health. We both have State Teachers Retirement, and the healthcare is great, but we are worried about long-term care. Is that available as a hybrid to our existing healthcare policy?

As retirees with excellent health coverage through State Teachers Retirement, you might consider hybrid long-term care insurance. Hybrid policies combine long-term care benefits with life insurance or annuities, providing financial flexibility and ensuring you receive benefits even if long-term care is unnecessary. Check with your existing healthcare provider to see if they offer hybrid long-term care options, or consult an independent insurance agent for tailored advice.

Are long-term care benefits taxable?

Long-term care insurance premiums may be tax-deductible if they exceed a certain percentage of your adjusted gross income (AGI) and you itemize deductions. The deductible amount varies based on age and is subject to IRS limits.

Can I get long-term care insurance without a medical exam?

Yes, through long-term care annuities and hybrid life insurance policies. These options typically require only a phone interview and a medical history review.

What happens if you cancel long-term care insurance?

If you cancel long-term care insurance, you lose coverage and won’t receive any benefits if care is needed. Additionally, you may forfeit any premiums paid unless your policy has a return-of-premium feature, which is rare.

How long is the typical free look period for long-term care insurance policies?

The typical free look period for long-term care insurance policies is 30 days. This allows you to review the policy and cancel it for a full refund if you are unsatisfied.

Can you lower long-term care insurance premiums?

Yes, you can lower long-term care insurance premiums by adjusting the coverage amount, choosing a longer elimination period, selecting a shorter benefit period, opting for a shared care rider, or qualifying for good health discounts.

Can you buy long-term care insurance with a lump sum of money?

Yes, you can buy long-term care insurance with a lump sum of money through single-premium policies or long-term care annuities, which provide benefits for care expenses without ongoing premiums.

Do I need long-term care insurance if I’m wealthy?

Even if you’re wealthy, long-term care insurance can help protect your assets, provide financial flexibility, and ensure high-quality care without depleting your estate. It can also relieve the financial burden on family members and offer peace of mind.

Where is the best place to purchase long-term care insurance?

The best place to purchase long-term care insurance is through independent agents. They offer various options from multiple insurers, provide unbiased advice, and tailor solutions to your needs and budget.

What is the most affordable way to buy long-term care insurance?

The most affordable way is to purchase a policy at a younger age, typically in your mid-50s to early 60s. Opt for a policy with a longer elimination period, shorter benefit period, and lower daily benefit amount. Consider hybrid policies or annuities with long-term care riders for more cost-effective coverage.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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