Long-Term Care Advantages and Coverage

Considering Long-Term Insurance?

If you are caring for a parent, spouse, sibling, other family member or close friend, you may need to consider long-term care at some point. An assisted living facility, a nursing home, at-home care, or other forms of paid long-term facilities are examples of long-term care. All of these options are pricey and could be out of reach for anyone on a tight budget.

The majority of older adults make end-of-life plans but are unprepared for the prospect of long-term care, according to the 2018 Long-Term Care Trend survey. Fifty-seven percent of Americans over the age of 40 polled had shared funeral preferences with someone they trusted. Of those individuals, 44 percent had produced legal documents such as a will. 

However, when it came to continued living care, only 29 percent had set aside funds to cover these costs. And only 23 percent had looked into long-term care insurance. According to the National Bureau of Economic Research, only 10 percent of elderly adults have a private long-term care insurance plan.

Long-term care insurance has advantages and disadvantages, but if properly planned, it could be just what your loved one needs later in life. A long-term care insurance policy can come in a variety of shapes and sizes. Because of this, it’s important to understand exactly what you’re receiving and for how much. Although it can be an important way for aging adults to cut costs, no program covers the entire cost of any long-term care option. 

A policy with bad terms and benefits is a waste of money. So, if your loved one is thinking about purchasing long-term care insurance, make sure it’s from a reputable provider with decent coverage, affordable premiums, inflation control, eligibility, and exclusions.

The Basics of Long-Term Care Insurance 

Long-term care insurance, which was first introduced in the 1980s as nursing home insurance, is not the same as conventional health insurance. Long-term care insurance is designed to cover the costs of long-term senior care and support. This includes whether it is given at home, in an assisted living environment, a skilled nursing facility, or another senior care setting. 

A long-term care insurance policy pays a predetermined daily amount to the policyholder to cover the expense of skilled nursing care, speech, physical activity, and rehabilitation therapy. They also provide coverage for programs to help them with activities of daily living (ADLs).

ADLs are basic self-care tasks, which typically include:

  • Ambulating (walking or getting around)
  • Feeding
  • Bathing
  • Dressing and grooming
  • Using the toilet
  • Continence management
  • Transferring (getting in and out of bed or a chair)

ADLs are used by most plans to decide whether or not policyholders are eligible for benefits. The policy also specifies the number of ADLs that the policyholder must require assistance with, in order to receive benefits. This number normally consists of two or three of the ADLs directly specified in the policy. This may vary slightly from those listed above or include additional ADLs not listed. 

Until buying a policy, contact multiple insurance companies to compare benefits, treatment choices, coverage limits, and premiums. Different policies can provide the same coverage and benefits, but their prices may differ dramatically. Make sure to inquire about the background of premium rate spikes by the insurance provider, as well as the magnitude of the most recent rise.

Who Should Purchase Long-Term Insurance?

According to the Home Care Association of America, as of 2020, there are 56 million Americans that are 65 or older. This figure will rise to nearly 84 million by 2050. In 2013, about 12 million Americans required long-term care, with adults over 65 accounting for 56 percent of that total. Unpaid relatives and friends who serve as caregivers provide the majority of this treatment. 

However, according to the Department of Health and Human Services, about half of those turning 65 would experience a disability severe enough to necessitate paying for specialized long-term services and assistance.

While the majority of people will only need assistance for two years or less, one in every seven will need assistance for more than five years. According to Kaiser Health News, about 4.8 million people had long-term care insurance plans in 2014, indicating that they were planning for this eventuality. 

The likelihood of having a disability and continuing to pay for long-term treatment is underestimated by the majority of our population. According to the National Association of Insurance Commissioners (NAIC), 70 percent of people over 65 will need long-term care at some point during their lives. Additionally, 35 percent will need to go to a nursing home at least once, with an average stay of one year.

Even if your elderly relatives are in good health now, there is still a good chance they will need long-term treatment in the future — at least for a while. 

The overall retirement goals, wages, and assets of your loved one will all play a role in determining whether or not they can buy long-term insurance. They shouldn’t buy long-term care insurance if their main source of income is Social Security or Supplemental Security Income, or if their income is poor enough that they’ll likely qualify for government assistance.

An individual should consider purchasing long-term care insurance if:

  • their income allows them to pay for long-term care out of pocket
  • they don’t want to use any or all of their income and assets to do so 
  • they want to choose where they receive care

The tricky part is determining whether they will need to pay for a long duration of regular, or even round-the-clock observation. Additionally, they will need to determine how long they will need to pay for it. This makes purchasing long-term care policies a risky proposition. Especially when one considers the fact that they may never need to use it.

Who Qualifies for Long-Term Care Insurance?

People who wait until they are in desperate need of treatment often feel that it is too late to buy a policy because eligibility is dependent on health rather than age. The insurance policy would be absurdly expensive if your loved one is in bad health or already receives long-term treatment. 

Even if your loved one had the ability to pay for the care fees, chances are they won’t be eligible for coverage. Medical underwriting is needed for most policies, so applicants who aren’t in reasonably good health are normally turned down.

Even if it’s just a mild case of hypertension that needs treatment, almost everyone has a health problem. Although something this small is unlikely to prevent you from receiving benefits, the American Association for Long-Term Care Insurance states that certain health problems and pre-existing health conditions make it almost impossible for applicants to qualify for coverage. 

In 2007, the American Association for Long-Term Care Insurance surveyed individuals 50 years and up. Breaking down the numbers of participants that claimed their applications were denied, 14 percent were in their 50s, 23 percent were in their 60s, 45 percent were in their 70s, and 70 percent were in their 80s.

If your loved one has the following conditions, they are unlikely to qualify for insurance:

  • Use oxygen
  • Use a wheelchair
  • Use a walking aid, such as crutches, a walker or a multi-pronged cane
  • Require assistance with any ADLs
  • Require assistance with shopping
  • Require assistance managing transportation, finances or communication
  • Use or imminently need home health, nursing home or assisted living care

There is also a long list of pre-existing medical conditions that disqualify an individual from getting insurance. Here are some of the conditions:

  • Alzheimer’s
  • Dementia
  • Kidney failure
  • Liver cirrhosis
  • Muscular dystrophy
  • Paralysis
  • Parkinson’s disease
  • Schizophrenia
  • Sickle cell anemia

However, if your loved one has a pre-existing health condition, he or she might be eligible for long-term care benefits. Health underwriting requirements will alter and differ from one insurer to the next, allowing them to choose a provider. The Long-Term Model Care Act states that if your loved one qualifies for insurance and the policy takes effect, insurance companies cannot cancel, fail to renew, or otherwise terminate a long-term care policy based on the policyholder’s age, gender, or degradation of mental or physical health.

What Does Long-Term Insurance Cover?

Based on the types of coverage the policyholder believes they will need and the premium amount they can afford, a long-term insurance policy can cover one or more types of treatment. For the most part, plans are dependent on the provider. This allows for benefits to be used in a number of long-term care facilities. That said, you should be able to double-check which services are protected. Keep in mind, the insurance company may refuse to pay benefits if your loved one is in the wrong the of facility.

Some laws only cover state-licensed facilities or nursing home treatment. However, many also cover assisted living facilities, which is significant given the rapid growth of this form of care. In-home services, such as nursing care, physical therapy, and medical supplies, are covered by many long-term insurance policies. Other add-ons, such as community care, which is normally referred to as adult day care, and respite care, which provides relief to an unpaid caregiver, can be covered by the policy. 

Some regulations can also include coverage to family members who serve as caregivers. Others may cover home improvements such as wheelchair ramps and safety devices. The majority of plans cover Alzheimer’s and other types of dementia treatment, although there are several exceptions. Because this is a common condition, double-check that your loved one’s long-term care insurance policy covers it. 

Aside from what’s protected, you should be aware of any undisclosed coverage exclusions that might preclude you from receiving benefits. While modern policies have fewer exclusions than their predecessors, they do exist, so be aware of them.

Many early plans didn’t pay compensation unless the policyholder needed long-term treatment after a three-day stay in a hospital or skilled nursing facility. Many people need long-term care as a result of growing frailty, chronic illness, dementia, or Alzheimer’s disease. Yet, these conditions do not necessarily necessitate hospitalization until requiring long-term care. If the requirement isn’t met, your loved one will most likely be ineligible to receive benefits. While most states have made it illegal for businesses to include this exclusion, it is still legal in some. 

The majority of long-term care insurance plans permanently restrict those conditions from receiving coverage. Keep an eye out for conditions that aren’t covered, such as certain types of heart disease, cancer, or diabetes.

Additionally, the following are some exclusions that may be applied to the insurance policy: 

  • Mental or nervous disorders, except Alzheimer’s disease and other forms of dementia 
  • Abuse with alcohol or other drugs 
  • Suicide attempts or deliberate self-harm 
  • Illness or disability incurred by a war act that requires treatment in a government hospital or that has already been paid for by the government 

A temporary exclusion is commonly built-in to policies offered to policyholders with pre-existing conditions. Pre-existing conditions are usually only protected for a limited time. This period of exclusion is usually six months long, but it may be shorter, longer, or nonexistent. Exclusion intervals of more than six months should be avoided.

When to Buy Long-Term Insurance

Long-term care insurance can be purchased at any age. Although, it becomes more costly and difficult to get accepted as you get older. As a result, the majority of people purchase their policies in their 50s or early 60s. Insurance providers may recommend buying a policy as early as 40 years old, but Consumer Reports advises waiting until you are 60 years old. 

A decent long-term care policy becomes very costly once an individual reaches their 70s. At this age, it can be extremely difficult to qualify for coverage, particularly if they already have health issues.

The right time for your loved one to purchase a policy is determined by what they want to do with their long-term care insurance. They can buy long-term care policies as soon as they have assets to protect and can afford the premiums if they want to be fully protected from the high costs of long-term care at all times. 

According to long-term care insurance specialists, it’s never too early to start thinking about long-term care insurance. When you are assisting a loved one with their insurance, you may want to think about getting benefits for yourself if you meet the requirements. This is because disability doesn’t discriminate based on age.

If you have a loved one whose primary concern is securing their assets in retirement, when does it make the most financial sense to consider buying long-term care insurance?

For the most part, insurance experts advise buying coverage while they are younger, between the ages of 45 and 55, for two reasons: 

  1. It is moderately priced. Long-term care insurance rates are about as low as they’ll ever be between the ages of 45 and 55, and cost fluctuations from one year to the next are minor during this period. 

2. Most people are still in reasonably good health at this age. Therefore, having a good health background will result in additional premium discounts. They will be able to lock in these lower premiums for the rest of their lives. 

After the age of 55, premium rates begin to accelerate and rise significantly from year to year when a person reaches their mid-60s. Long-term care insurance should be purchased sooner rather than later, when premiums are still affordable.

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