According to the U.S. Department of Health and Human Services, most seniors will require long-term care at some point in their lives. The department estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point.1 As you might guess, long-term care can be costly and financially challenging. Without a plan in place, you could struggle to pay for the care you need.
Long-term care insurance is one tool you may want to consider to minimize the financial impact. You pay premiums to an insurer. Then, when you need care in the future, the insurer pays some or all of your long-term care costs. Policies can vary greatly in terms of cost and coverage. You may find the options overwhelming.
If you understand the parts of long-term care insurance, however, you can better analyze your choices. Below are descriptions of a few key components of every long-term care policy. A financial professional can also help you find the right policy for you.
The premium is the cost of the insurance. It’s the amount of money you must contribute to support the policy. Some policies require one-time, lump-sum premiums while others allow you to make monthly or annual premium payments.
The premiums amount is based on several factors, including the policy benefits, your age and your health. It’s possible that you may need to go through underwriting before your premiums are finalized. Generally, the older or less healthy you are when you buy your policy, the higher your premiums will be.
The policy benefit is another important variable. It’s usually expressed in a daily or monthly amount. For example, your policy may cover up to a certain amount per day or month for care. If your care exceeds that amount, you have to pay the difference.
Some policies also have maximum lifetime benefit amounts. Again, if your care exceeds this amount, you’re responsible for covering the difference. Higher benefit amounts usually lead to higher premiums.
Most policies cover specific types of care. Those guidelines are spelled out in the policy document. For example, your policy may cover only a semiprivate room in a facility. Other policies may cover in-home care or even medical equipment. Some policies even provide reimbursement for care provided by a family member. Generally, the more robust your coverage, the higher the premium will be.
Coverage varies widely by policy. It’s important to think about your goals and which types of services are important for you. Be sure to research policies carefully to make sure the covered care aligns with your objectives.
Nearly all long-term care policies have a waiting period, also known as an elimination period, that you must wait before coverage will kick in. This period is meant to ensure that the need is actually for long-term care and not for a short-term injury or illness. Elimination periods usually last 30, 60 or 90 days. The longer your elimination period, the lower your premiums are likely to be.
Finally, you may want to choose inflation protection on your policy. This is usually an optional benefit, so it may increase your premiums. However, it’s an important feature that helps you keep up with rising long-term care costs. Inflation protection increases your benefit amount by a certain percentage each year. That could be especially helpful if you don’t expect to use the coverage until long into the future.
Ready to develop your long-term care funding plan? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. 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. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.17748 - 2018/6/19
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