Individuals applying for long term care insurance are usually frustrated. This is because they are turned down by insurance companies and are looking to apply elsewhere.
But they do not stop to think why they were rejected in the first place.
It often happens that individuals do not really know when they should be buying long term care insurance. This is the most common reason people are often rejected from buying the policy. Well, we are here to tell you when you should be buying long term care insurance.
But first, what exactly is long term care insurance?
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What is Long Term Care Insurance?
According to the long term care insurance definition, it is the same thing as nursing home insurance. The question that begs our attention is, who will take care of us when we are older?
That is essentially where long term care comes into play. It is usually for people above the age of 65 who can no longer take care of themselves. Long term care can take many forms but it is typically to help someone manage their everyday tasks and activity of daily living, such as bathing, eating, dressing, etc, that they otherwise could not manage on their own either due to injury or health conditions and cognitive disorders like Alzheimer’s.
Long term care can also refer to tasks such as managing money, taking medications, etc, which are known as “instrumental activities of daily living.”
Since long term care is not medical care as many factors are involved, it is not covered by Medicare or other health insurances. You can choose to get long term care services at the comfort of your home from a health aide or homemaker service or in a nursing home, adult day care and assisted living facility.
So to answer the question, “what does long-term care insurance cover?”, it basically covers everything and anything you might need help with.
How Much Does Long Term Care Insurance Cost?
Long term care for many families does not make sense. Even though many people can afford to have care for an elderly or disabled family member, it is not possible to afford them for years on end.
According to David Demming, a certified financial planner in Aurora, Ohio, the most suitable way is for 50 to 55 year olds who have a net worth of $1 million to $3 million to buy long term care insurance as the cost of the premium is less than 0.5% to 0.99% of net worth for them.
It is not difficult for people with deep pockets to afford the cost of long term care. However, people who do not have as much might not be able to afford the cost and would instead rather become Medicaid recipients. Even though Medicaid covers long term care services, it has strict income and asset eligibility requirements that have been set in place by each state.
The cost of the long term care insurance premiums depend on many factors such as age, health and the amount of coverage needed. If you need higher benefit amounts with longer coverage periods, the cost of your premiums will automatically rise.
It is possible for there to be a price variation between different insurance companies that offer the same policy. However, the difference in price does not mean much as all insurance companies provide virtually identical insurance protection when it comes to long term care insurance.
The average annual premium for a single woman is $2,675 whereas for a single man it is $1,700 and $3,050 for a couple.
Now, even though it is possible for insurance companies to have different rates, you still need to make sure the rate you are getting is not unreasonably high. In order to avoid overpaying for a policy, you should contact an insurance agent who has all the knowledge so they can assist you in comparing quotes from several companies. It might make sense for you to discuss your retirement planning as well with your insurance agent so they can find a policy accordingly for you.
To find out a quick long term care insurance cost estimate, you can check out online long term care insurance calculators available on websites of every large insurance carrier like Mutual of Omaha.
When Should I Buy Long Term Care Insurance?
The ideal age to apply for long term care insurance is in your mid-50s. Here is why:
It is not common knowledge that health is the qualifying factor when buying long term care insurance. People assume insurance is always bought with money. However, that is not the case. Your health is the most important factor in determining whether or not you will get an insurance policy. But where does age come into play with health?
Once you start ageing, your health never remains the same. And once you reach the age of 50, you can diet and exercise all you want but you will never be able to get back to what you used to be at 40. Even if your health might be hanging on with the help of prescriptions, the changes in your health once you turn 50 get too significant for long term care insurers to ignore. Which is why it can get difficult, or even impossible, for you to health qualify for long term care insurance.
It is important to keep in mind that insurers offer discounts to candidates who are in relatively good health. So in order to get the best rates and qualify for long term care insurance, you should try and maintain a healthy lifestyle. If after the policy agreement has been written and your health deteriorates, you will not lose your discounts.
You should also keep in mind that every insurance company has their own health requirements. Where some might be strict about certain health conditions, others might be lenient for the same conditions. To tackle the situation, it is important to find a long term care insurance company that is accomodating to whatever health conditions you have, if any. You should also speak to a long term care insurance professional that can help you find a company more suitable for your needs as some insurance companies also accept existing health conditions even if you had been rejected on the basis of the same exact conditions before.
Since more significant health conditions take place when people are in their 50s, it is recommended that long term care planning start when you turn 50. However, long term care insurance protection usually grows to keep up the pace with rising costs. So by default, the benefit you bought at age 55 will have grown in benefit value by the time you have reached the age of 65.
However, someone that is aged 65 today would be paying more in coverage as they would not be able to qualify for a good health discount. And that reflects how quickly rates rise. So if you are a 55 year old who is waiting to turn 65, it is highly likely that you will be paying even more in 10 years.
Should I Buy Long Term Care Insurance?
For people over 65, Medicare or private health insurance does not seem to be a reliable option solely because Medicare does not pay for custodial care and private health insurance rarely focuses on paying any of the cost of long term care.
You might be able to qualify for Medicaid, a government program that pays the medical and long term care expenses for people who cannot seem to afford them. If you expect to be in a situation where you do not have enough money but need long term care services, it would not be the best idea for you to buy long term care insurance as your state’s Medicaid program will take care of your long term care expenses. If you buy long term care insurance, you will only be saving the state’s money and not your own. The only exception is if you live in states like New York, Indiana, California and Connecticut that have a Partnership for Long Term Care program. For individuals living in any of these four states, buying long term care insurance will provide an additional benefit.
However, even if you expect to have a lot of money when you need long term care services, buying long term care insurance still would not be a good idea. Instead you should try to pay for the care as a regular expense from your own pocket.
It was suggested by one financial advisor in a newspaper interview that you could skip buying long term care insurance and treat any long term care expenses as you treat your other expenses if your net worth is in the $1.5 million range (not including the value of your home).
However, it might be beneficial for you if you fall somewhere in between these two categories. Just like all other insurance coverages, owning life insurance can offer peace-of-mind benefits along with the financial ones. For example, a recent survey asked people aged 50 and above how confident they were that they would be able to pay for long term care services if the need ever arose. From people with long term care policies, 52 percent said they were very confident whereas another 40 percent said they were somewhat confident. From people who did not own a long term care policy, only 8 percent said they were very confident and 27 percent were somewhat confident.
So to conclude, who needs long term care insurance depends on whether or not it would be a good fit for them. If you have so much money that you can manage to pay for your long term care out of your own pocket or if you have so little money that you can qualify for Medicaid, long term care insurance is not for you. However, if you neither have too much or too little, long term care insurance could be the best option for you. It is also important to keep in mind when the best time to buy long term care insurance is. So to answer the question, “when should I buy long term care insurance?”, if you are buying long-term care insurance for parents, you should make sure they are 50 and over and the same rule applies if you are buying it for yourself.