Long Term Health Insurance Explained
It might be hard to imagine now, but chances are you will require some help taking care of yourself later in life.
Buying long-term health insurance plans is one way to prepare. Long-term care refers to a host of services that are not covered by regular health insurance. This comprises assistance with routine daily activities, such as bathing, dressing, or getting in and out of bed.
A long-term care insurance policy assist cover the expenses of that care when you have a chronic medical condition, a disability, or a disorder like Alzheimer’s disease. Most health care policies will reimburse you for the care given in a variety of places, like:
- Your home.
- An assisted living facility.
- An adult daycare facility.
- A nursing home.
Considering long-term care costs is an essential part of any long-range financial plan, especially in your 50s and beyond. Waiting until you need the care to buy coverage is not a choice. You won’t be eligible for long-term care insurance if you already have a debilitating condition. Most people with long-term health insurance buy it in their mid-50s to mid-60s.
Whether long-term care insurance is the right option depends on your situation and preferences.
Why Purchase Long Term Care Insurance
Almost half of 65-year-olds today will eventually develop a disability and need some long-term care services, according to a study revised in 2016 by the Urban Institute and the United States Department of Health and Human Services. Most will require services for less than two years, but about 14% will require care for more than five years.
Regular health insurance does not cover long-term care. And Medicare won’t come to the rescue, either; it covers only short nursing home stays or limited amounts of home health care when you need skilled nursing or rehab. It doesn’t pay for custodial care, which comprises supervision and help with day-to-day tasks.
If you don’t have insurance to cover long-term care, you will have to pay for it yourself. You can get help through Medicaid, the federal and state health insurance program for those with low incomes, but only after you have exhausted most of your savings.
Individuals buy long-term care insurance for two reasons:
- To protect savings. Long-term health insurance care costs can deplete a retirement nest egg quickly. The average cost of care in a semi-private nursing home room is $89,297 a year, according to Genworth’s 2018 Cost of Care Survey.
- To give you more options for care. The more money you can spend, the better the quality of care you can receive. If you have to depend on Medicaid, your choices will be limited to the nursing homes that accept payments from the government program. Medicaid doesn’t pay for assisted living in many states.
Purchasing long-term care insurance might not be affordable if you have a low income and little savings. The National Association of Insurance Commissioners says some professionals recommend spending no more than 5% of your income on a long-term care policy.
Cost of Long-Term Care Insurance
The cost of long term care insurance depends on a variety of things, including:
- Your age and health: The older you are, and the more health issues you have, the more you’ll pay when you purchase a policy.
- Gender: Women typically pay more than men because they live longer and have a higher chance of making long-term care insurance claims.
- Marital status: Premiums are lower for married persons than single people.
- Insurance carrier: Costs for the same amount of coverage will vary among insurance companies. That’s why it is significant to compare quotes from different carriers.
- Amount of coverage: You will pay more for richer coverage, like higher limits on the daily and lifetime benefits, cost-of-living adjustments to protect against inflation, shorter elimination periods, and fewer restrictions on the kinds of care covered.
A single 55-year-old man in good health purchasing new coverage can expect to pay an average of $2,050 a year for a long-term care plan with an initial pool of benefits of $164,000, according to a 2019 price index from the American Association for Long-Term Care Insurance. Those benefits compound yearly at 3% to total $386,500 at age 85. For the same plan, a single 55-year-old woman can expect to pay an average of $2,700 per annum. The average combined premiums for a 55-year-old couple, each purchasing that amount of coverage, are $3,050 a year.
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