Long-Term Care Coverage: 6 Tips Before You Buy
Long-term
nursing care can be very expensive – depending on where you live, costs can
range between $ 60,000 and $ 200,000 per year.
Yet most
people don’t plan for the expense, and report that they hope not to need
insurance to help pay for care in their later years. That’s probably wishful
thinking.
According to
the U.S. Department of Health and Human Services, roughly 70% of Americans over
65 will require some type of long-term care.
Long-term
health insurance is a good idea to help protect against future health care
costs that Medicare doesn’t pay for, such as extended home care, assisted
living and nursing care.
Here are 6
things you should know about long-term care insurance before you buy coverage:
1. Buy
young. The younger you are when you buy long-term care coverage, the less
expensive it will be. You’ll also have a better chance of being approved for a
policy. Unlike health insurance under the Affordable Care Act, long-term care
insurance is not guaranteed. If you already have a chronic condition, such as
diabetes or heart disease, you’re likely to be turned down.
Experts
generally suggest your mid-50s or 60s as a good time to think about buying
coverage.
2. Explore
all options. Don’t let the price of long-term care insurance stop you from
looking for a policy.
Depending on
your budget you may want to consider plans that will cover some, though not
all, of your long-term care costs. There are plans that may cover $ 150 per day
for three years, for example, but the benefit amount doesn’t keep up with
inflation.
If you’re
willing to spend more, you can buy a policy that keeps up with inflation — say
3% compounded annual growth, which is common these days.
Some
insurers sell a “shared benefit plan” in which a couple shares a pool of six
years of coverage that can be used as needed between spouses.
Work with a
broker to find a plan that offers at least some coverage at a price you can
afford.
3.
Understand what’s covered. All health
insurance policies will require proof of how many activities of daily
living you need help with – bathing, dressing, eating or using the toilet –
before agreeing to cover your costs.
Experts I’ve
talked to suggest buying a policy that kicks in once you need help with no more
than two activities of daily living.
4. Know when
coverage starts. Most policies have a waiting period during which you must pay
for long-term care services on your own before insurance begins to pay. It
could be 30 days or 90 days, or something in between. The longer the period you
have to pay out of your own pocket, the less you’ll pay in premiums for the
policy.
5. Know how
benefits are paid. You’ll also want to
pay attention to how the plans pay out the benefits. Some will pay you a lump
sum for the allowed monthly benefit, while others require you submit expenses
and then reimburse you. No one option is better than the other, but it’s good
to know what to expect.
6. Work with
a knowledgeable agent. Long-term care insurance is a complicated product, so
it’s a good idea to work with an experienced agent. The American Association of
Long Term Care Insurance recommends looking for three things in an agent:
Someone with
at least three years of experience selling long-term coverage.
An agent who
has sold a minimum of 100 long-term policies.
An agent who
works with a minimum of three or four different companies.
To find an
insurance agent and more information about long-term care insurance visit the
American Association of Long-Term Care Insurance and/or the National
Association of Health Underwriters.
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