Understanding Long-Term Care Insurance Before Acquiring One
Why Buy Long-Term Care Insurance?
Nearly 70% of 65-year-old people will need long-term care services or support, according to 2020 data from the Administration for Community Living, part of the U.S.
Department of Health and Human Services. Women typically need care for an average of 3.7 years, while men require it for 2.2 years.
Regular health insurance doesn't cover long-term care. And Medicare won't come to the rescue, either; it covers short nursing home stays or limited amounts of home health care when you require skilled nursing or rehab only.
It doesn't pay for custodial care, which includes supervision and helps with day-to-day tasks
If you don't have insurance to cover long-term care, you'll 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've exhausted most of your savings.
People buy long-term care insurance for two reasons:
To protect savings. Long-term care costs can deplete a retirement nest egg quickly. The median cost of care in a semiprivate nursing home room is $93,072 a year, according to Genworth's 2020 Cost of Care Survey. Source: nerdwallet.com
Questions That You May Ask?
- Why buy long-term care insurance?
- How much do premiums cost?
- What types of benefits can I get?
- Who pays my premium?
- Can I keep working while receiving long-term care benefits?
- Will I lose money buying long-term care insurance today?
If you're considering purchasing long-term care insurance, there are several things to consider before making a decision. Here are five questions to ask yourself:
1. Why should I purchase long-term care insurance now?
2. What type of policy should you buy?
Long-Term Care Insurance Explained
If your parents or grandparents have long-term care insurance and they die before the policy expires, their beneficiaries can receive a lump sum payment that may cover nursing home costs, assisted living expenses, hospice services, physical therapy, speech therapy, occupational therapy, medical equipment, transportation, housekeeping, meals, laundry, medication management, personal assistance, respite care, and other benefits.
The amount of money available depends on how much was paid into the plan when the insured person died.
Annual Median Costs Of Long-Term Care In 2020
Qualifies as long-term care insurance in Washington.
- Nursing Home Room Median Annual Costs - $93.072
- Assisted Living Facility Median Annual Costs - $67.856
- Adult Daycare Center Median Annual Costs - $33.928
- Home Healthcare Median Annual Costs - $18.632
Source: Genworth Financial Inc., 2019 Cost of Care Survey
In addition to protecting money, buying long-term care insurance gives you
How popular is long-term care insurance?
According to AARP, nearly half of Americans aged 55 to 64 own at least one type of long-term care insurance. That compares with just 28% who had such policies as recently as 2010. AARP also found that women are much less likely than men to carry long-term care insurance — 29% compared with 48%. But among younger adults ages 25 to 44, there was almost equal interest in buying this kind of protection.
What types of plans are available? How popular is long-term care insurance?
According to AARP, nearly half of Americans age 55 and older say they're likely to use long-term care benefits at least once during their lifetime. That compares with just 28% who said so five years ago.
A recent survey by MetLife found that one out of every four adults ages 45 to 64 has purchased long-term care insurance. Among seniors, the figure was even higher — three out of 10 had bought such policies.
What are the options available?
Cost Of Long-Term Care Insurance
Long-term care costs vary widely depending on where you live, how old you are and what type of care you require. For example, nursing home stays average $4,000 a month nationally but range between about $1,500 and more than $20,000 a month in some states.
In addition to monthly payments, many plans include annual fees ranging from several hundred dollars to thousands of dollars. These charges cover administrative expenses like marketing and underwriting.
Tax advantages of buying long-term care insurance
Long-term care insurance can have some tax advantages if you itemize deductions, especially as you get older. Federal and some state tax codes let you count part or all of long-term care insurance premiums as medical expenses, which are tax-deductible if they meet a certain threshold. The limits for the number of premiums you can deduct increase with your age.
2021 federal tax-deductible limits for long-term care insurance. Source: IRS Revenue Procedure 2020-45
Age at the end of the year Maximum deductible premium
40 or under $450
41 to 50 $850
51 to 60 $1,690
61 to 70 $4,520
71 and over $5,640
Only premiums for tax-qualified long-term care insurance policies count as medical expenses. Such policies must meet certain federal standards and be labeled as tax-qualified. Ask your insurance company whether a policy is tax-qualified if you're not sure.
Source: nerdwallet.com
1. Traditional policies have fewer fans
by Ellen Stark, AARP Bulletin, March 1, 2018, Only 7.2 million or so Americans have LTC insurance, which covers many of the costs of a nursing home, assisted living, or in-home care expenses that aren't covered by Medicare. “Long-term care is the unsolved problem for so many people,” says Christine Benz, director of personal finance at Morningstar, an investment research firm in Chicago. Traditional LTC policies were once considered essential protection against the cost and indignity of needing help with daily tasks like bathing, dressing, and eating. But they're no longer as popular as they used to be. In fact, only 4% of adults under age 55 now own traditional plans, according to Genworth Financial Inc., a provider of life insurance products based in Boston. That compares with nearly 20% who owned them in 2000. The reason? They can get pricey fast.
Long Term Care Insurance Companies
1. AARP Life & Health Insurance Company
2. American Benefit Administrators
3. Ameriprise Financial
4. Anthem Blue Cross
5. AXIS Capital Management
6. BancorpSouth
7. Bankers Life
8. Benefis
9. Berkshire Hathaway
10. Boston Mutual
11. Brookdale Senior Living
12. California Pacific Group
13. Caremark
14. Centene
15. Charles Schwab
16. Chubb
17. Citigroup
18. Columbia Casualty
19. Coventry
20. Diversified Group
- General American Life Insurance Company
- Genworth Financial Incorporated
- Great-West Life Assurance Company
- Guardian Life Insurance Company of America
- Guaranteed Issue Life Insurance Company
- Health Care Service Corporation
- Hudson Valley Life Insurance Company
- Illinois National Life Insurance Company
- Independent Agents Mutual Life Insurance Company
- Interstate Fire And Casualty Company
- International Paper Company
Best Long-Term Care Insurance
New York Life offers the best long-term care insurance We publish unbiased product reviews; our opinions are our own and are not influenced by the payment we receive from our advertising partners. Learn more about how we review products and read our advertiser disclosure for how we make money.
Long-term care insurance is a specialty type of insurance that helps pay for costs that are typically associated with long-term care (LTC). These costs can include things like care given in a hospital, nursing home services, medical services provided in your home, and treatment for diseases such as Alzheimer's.
The best long-term care insurance will be offered by reputable providers with high ratings and positive overall reviews. It will offer competitive prices, multiple types of coverage, and discounts. Some providers will also provide discounts and won't require any waiting periods. Source: investopedia.com
Final Verdict
If you're looking to buy LTC insurance, it may seem overwhelming at first glance. But if you do some research on different companies' policies and compare them side-by-side, you'll find out which one works best for you.
How Much Does Long-Term Care Cost?
You might think that buying an expensive policy would mean getting better benefits or lower premiums. However, this isn’t always true.
Comparing Long-Term Care Insurance Providers
When comparing different policies, consider their benefits, pricing, and other factors before choosing one over another. For example, some plans have higher premiums than others because they charge based on age instead of health status. Also, keep in mind that many insurers only sell certain kinds of policies, so check which ones are available where you live. You should always compare rates across several carriers when shopping for LTC insurance . This way, you'll get the most affordable price possible.
Does AARP sell long-term care insurance?
AARP Long-Term Care Insurance AARP does not sell long-term care insurance.
What is Genworth Financial?
Genworth Financial In terms of the number of long-term care insurance policyholders, Genworth is the largest in the nation. The Federal Long Term Care Insurance Program is a voluntary program that provides long-term care insurance for individuals who are not eligible for Medicare. The FLTCIP was established in 1983 by Congress as part of an effort to provide affordable, quality health and long-term services and supports. It offers benefits to people with disabilities or chronic illnesses who need help paying for their LTSS needs but do not qualify for Medicaid coverage because they have too much income.
Genworth Financial
Your mid-50s is the ideal time to apply, according to the American Association for Long-Term Care Insurance, when you're in good health and can qualify for a well-priced plan. Genworth Financial Inc., founded in 1859, offers two types of coverage: traditional long-term care insurance and supplemental benefits. The latter covers additional medical bills not covered under the former. Both have annual premiums ranging from about $1,200 to more than $3,500.
Traditional long-term care insurance pays monthly benefit checks directly to qualified caregivers who provide personal assistance to insured individuals. Supplemental benefits pay for extra medical treatment beyond what would normally be covered by a typical policy.
- Mutual of Omaha
Your mid-50s is the ideal time to apply, according to the American Association for Long-Term Care Insurance, when you're in good health and can qualify for a well-priced plan.
- Mutual of Omaha
- Municipal Employees Retirement System
- Metropolitan Life Insurance Company
- New York State Teachers' Retirement System
- North Carolina Public School Employees’ Retirement System
- Ohio Public Employees Retirement System
- Pennsylvania General Assembly Pension Trust Fund
- Tennessee Department of Finance & Administration
- Texas Teacher Retirement System
- United Services Automobile Assn.
Cons
Lack of transparency around prices makes it difficult to compare quotes
Nationwide
availability
Cons
Waiting time between application submission and approval varies from two weeks to three months depending on where applicants live
Some customers report difficulty getting approved due to poor credit scores
AARP Foundation Life Insurance Company
This California-based insurer was founded in 1946 and provides long-term care insurance to more than 2.5 million people across the U.S., Canada, and Puerto Rico. AARP members get access to discounted rates compared to nonmembers.
Buy Long-Term Care Insurance at the Right Age to Get the Best Value
That's why getting insurance to cover a chunk of the costs for in-home care, an assisted living facility or a private room in a nursing home is a personal finance move to consider. The key, though, is getting the most bang for your insurance premium bucks.
The catch? The price of long-term care coverage can be cost-prohibitive The national median daily cost for a private bed in a nursing home in 2019 was $280 a day, or $102,200 a year up nearly 2 percent from a year ago, according to insurance company Genworth's 2019 cost of care survey. A yearlong stay in your own room at an assisted living facility runs $48,612. Those are big numbers that can eat through a retirement nest egg quickly. The average 401(k) balance was $105,200 at the end of September 2019, according to Fidelity Investments. Source: aarp.org
Thank You For Reading!
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