Let’s start with a basic explanation of what long-term care insurance is. Long-term care is needed when an individual is diagnosed with a chronic illness or disability and require assistance to help them perform daily activities. These activities vary from simple activities like eating, bathing and dressing; to complicated skilled care that requires a nurse or a professional. Being provided with these services daily becomes expensive and this is where long-term care insurance can help. LTC insurance covers many things such as the costs of a live-in nurse, nursing homes, and assisted living facilities. It may also cover adult day care, care coordination, and even the cost to modify your home so you can continue to live in it safely.
Many people believe that they do not have to worry about long-term care insurance until they are in their 60s. This is a big mistake that many people make. Like any insurance, LTC is based on how much of a risk you are. The cost is based on your age and your health, much like life insurance. Therefore, the older you are the more expensive a long-term care policy will be. Experts agree that your 50s is the best time to buy LTC insurance because that is when it is the cheapest and most accessible. For example, if a 65-year-old man purchases $110,000 of coverage with benefits that grow 5% a year his annual premium is about $2,770. If he purchased the same coverage 10 years earlier, at age 55, he would have paid approximately $1,032 in annual premiums.
There are two main types of long-term care insurance policies, Traditional and Hybrid. They both have their own unique benefits. Traditional policies are the one that most of us are familiar with. With these policies you pay your premium every month and if the need for long term care arises you utilize your coverage. However, Hybrids are becoming more and more popular; and it has caused traditional policies to decline in sales. Hybrid long-term care insurance combines LTC insurance with a life insurance policy either as a rider or an accelerated death benefit. Not only do you get LTC insurance, but you also get life insurance which gives you a death benefit as well. However, there are some cons with hybrid policies. They have mortality and expense fees; and with accelerated death benefits you must deplete your death benefit before you can utilize your additional LTC coverage. There are also life insurance policies where you add long-term care insurance as a policy rider for an additional fee.
Another way that you can get long-term care coverage is combining it with an annuity. Annuities generally tend to be much less expensive than buying stand-alone LTC coverage. One pro with a hybrid annuity policy (if you don’t need the LTC benefits) is that the full value of the annuity can be used either by yourself or your beneficiaries. There are some products available which allow you to invest the premiums you pay for long term care and apply them towards a fixed income, while providing higher payouts should you require long term care. The one con connected to this type of policy would be that it’s subject to interest rate fluctuations which are currently on the low side.
Long-term care insurance can be a complicated subject. Many experts suggest people to work with their financial advisor to come up with the best LTC solution for them. If you are interested in long-term care insurance or have any questions, you can always contact us, and we will simplify it for you. As with everything else we do, we are working in your best interest and we will provide you with the best long-term care insurance solution.
Long Term Care Insurance: What You Need to Know
