Think you don’t need to prepare for long-term care in retirement? Think again. According to the U.S. Department of Health and Human Services, more than 70 percent of Americans over the age of 65 will need long-term care at some point in their lives.1
Long-term care is ongoing support and assistance for individuals who are unable to perform one or more basic activities of daily living. These activities include things like getting dressed, using the restroom, walking, eating and more. Often, long-term care is needed because of injury or because of cognitive disorders such as Alzheimer’s.
Unfortunately, long-term care is often costly, and it usually isn’t covered by Medicare. That means many seniors face the prospect of paying for long-term care out of pocket. The good news is there are options available. One possible strategy is long-term care insurance, which can help pay some or all of the cost of long-term care.
What is long-term care insurance?
As the name suggests, long-term care insurance (LTCI) is an insurance policy that provides financial protection for long-term care costs. You pay premiums today for the coverage. Then, if the protection is triggered, the policy pays out coverage to help you cover the costs.
How is the protection triggered? In many cases, an insured person must require assistance with certain daily living activities. In some policies, the insured may need a doctor's certification that long-term care is necessary.
Many policies cover not only care in a facility, but also in-home care. For instance, you might be able to use the policy to pay an in-home nurse or to hire a housekeeper. You also may be able to use the policy to pay for modifications to the home, like a wheelchair ramp. In many cases, an LTCI policy might help you stay in your home as long as possible.
How to choose an LTCI policy
Many LTCI policies have a number of variables and moving parts. These variables can impact the cost of the insurance as well as your coverage, so it’s important for you to know how they work and what they mean. Below are some of the most important components of a long-term care policy:
Elimination period. This is the amount of time you must wait before payments kick in. For instance, you may have to wait 30, 60 or even 100 days after you need care before receiving payment. Generally, the longer the elimination period, the lower the premiums.
Benefit duration. Some policies have time limits on benefits. For example, a policy may pay benefits for only a maximum of four years. Longer benefit periods usually mean higher premiums.
Daily benefit. Long-term care is often priced per day. The daily benefit is the amount per day the insurance company will pay. If the daily benefit isn’t high enough, you may have to cover the difference out of pocket.
Inflation protection. It’s possible you may buy your policy today but not use it for years or even decades. It’s also possible long-term care costs will rise over that time. Inflation protection increases your daily benefit to help you keep up with growing long-term care costs. This is usually an optional feature that will also increase your premium.
These are only a sampling of some of the features and components you may need to consider. If you’ve never thought about long-term care insurance before, you may find your options to be complex and possibly even confusing.
Here at J. Harris Financial, we welcome the opportunity to help you review your long-term care needs and identify potential strategies. We look forward to helping you find the best long-term care protection for your needs and your budget. Contact us today to start the conversation.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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