Currently, about half of the population over the age of 65 requires paid long-term care, and on average, will spend $140,000 if paying out-of-pocket. This amount is nothing to scoff at, and yet many have not planned for this financial risk. Only about 7.2 million Americans have long-term care insurance, which can cover many of the costs of a nursing home, assisted living, or in-home care—expenses that are not covered by Medicare. Here are five things that you should know about long-term care insurance:
1. Traditional Policies are Unpopular
For many years, long-term care insurance consisted of paying an annual premium in return for financial assistance if you ever needed help with daily activities such as cooking and eating meals, bathing, and dressing. These days, terms typically include a daily benefit of say, $150 for nursing home coverage, with a waiting period of about three months before insurance kicks-in and a maximum coverage term of three years.
These stand-alone long-term care policies have a history of premium spikes and insurer losses, and sales have fallen dramatically since the 1990s.
2. Even if You Don’t Need Insurance, You Need a Plan
The average long-term care policy has a $2,700 annual premium, which puts coverage out of reach for many Americans (though discounts for couples are common). If you do not have many assets, you may qualify to have your long-term care costs covered by Medicaid, and if you have a decent-sized nest egg, you likely can pay for future care out-of-pocket. Consider factors other than cash – is there equity in your home? Can you count on your children for assistance? Do you have an increased risk of needing care?
If you are not using much of your savings, each year for living expenses, you may be comfortable forgoing insurance, but be sure to plan for the possible expense.
3. Hybrid Policies are Gaining Traction
As sales of traditional long-term care insurance have fallen, a hybrid policy has begun to gain popularity. This hybrid policy consists of whole life insurance that you draw from as needed for your long-term care. Unlike a traditional policy, these hybrid policies return money to your heirs if you don’t end-up needing long-term care. You also don’t run the risk of a rate hike as you’ve locked-in your premium upfront.
4. Hybrid Polices are More Expensive than Traditional Policies
For cost-effective coverage, no other type of policy beats traditional long-term care insurance. Hybrid policies are typically two to three times more expensive, but with the guarantee of getting money back if unused.
A hybrid policy may be the best idea if you are using it as an alternative to your savings. Additionally, you may be able to roll over an existing whole life insurance policy or annuity into a hybrid policy.
5. Start Planning Early!
The best time to plan for your future is before you need assistance! If you want long-term care insurance, start shopping around for coverage in your 50s or early 60s, before premiums become too high or a dip in your health leaves you with lackluster coverage options. Premiums at age 65 average about 10% more than premiums at age 64.
If you would like more information on your options for long-term care planning for yourself or a loved one, contact our experienced elder law attorneys today at (312)878-0155 or click here to request a consultation online! Join us to discuss long-term care planning at 6:00 p.m. on July 30, 2019 at the River Forest Public Library!
The River Forest Public Library is located at 735 Lathrop Ave., River Forest, IL 60305.