The longer one waits, the pricier it gets. It’s not an airplane ticket, a hotel booking or college tuition.
It’s long-term insurance, and for the 40 percent of the aging population who will require some sort of nursing home stay, it could make a big difference in the care you receive.
What is it?
Long-term insurance is a plan some people opt to buy to cover daily expenses that aren’t covered by employer-based health coverage or Medicare. Depending on the policy one buys, long-term care insurance could help cover assisted living, nursing home or at-home care expenses.
According to Northwestern Mutual Life Insurance Company, more than 735,000 people nationwide live in assisted-living settings in the United States. The national average annual private room cost in a nursing home is $91,305 per year. For this reason, more than 10 million Americans have purchased long-term care insurance, according to the American Association for Long-Term Care Insurance.
What does the insurance cover?
Long-term care insurance policies may cover nursing home stays, assisted living, adult day care services, home care and home modification like installing ramps or grab bars. The policies might also cover future service options that have not yet been developed.
The policies generally do not cover housing costs for assisted living or nursing-home facilities — just the care a patient requires.
How much does it cost?
The plans are not standardized, so read them carefully. The policies can pay different amounts of money depending on the service — for example, $50 for daily home care or $100 for daily nursing home care. When purchasing a plan, the buyer picks the amount and duration of care to match their budget and anticipated needs.
The cost of the policy also depends on one’s age and one’s level of health. A 55-year-old person who buys a “standard” plan of coverage pays about $1,084 per year for $172,600 in benefits because they would qualify for the preferred health discount and spousal discount, according to the American Association for Long-Term Care .
Someone age 65 would pay $3,275 for $276,000 in coverage because it’s very unlikely they will still qualify for the good health discount.
Ted Sangalis is a wealth management adviser at Northwestern Mutual, and helps clients navigate policies like long-term care insurance.
“The price you pay today will go up in the future,” he said. “Historically, every company in the business has raised rates on clients.”
When should I buy?
Sangalis said that if a person has other insurance needs that are planned for and in order, then they can start to look at long-term care.
“If you pass away, can you support your kids? If yes, than long-term care is something to consider,” he said. “I wouldn’t suggest someone to get long-term care when their life insurance needs are not met.”
He added that a person should buy whenever they anticipate future need for care. When a person purchases it, the rate is fixed and will not be impacted by any health changes.
“It’s non-cancelable,” he said. “The company can’t kick you out.”
Do I qualify?
A person qualifies for benefits when they need help with two or three specified “activities of daily living.” Those include bathing, eating, dressing, using the toilet, walking and remaining continent.
According to the American Association of Long-Term Care Insurance, 68 percent of people age 65 and older likely can’t perform two of these.
Most insurers disqualify applicants who have mental disorders, self-inflicted injuries and substance abuse. Others might disqualify buyers with Alzheimer’s disease, severe dementia, or illnesses caused by war.
How can I get it?
Long-term care insurance plans are often bought through an insurance agent or broker, but can also be offered by some employers, professional organization, state partnership programs or joint policies.
A joint policy covers more than one person, and includes a cap on benefits that apply to those under the policy. If one person exhausts the funds, however, the other partner could be at a loss later on.
When do my benefits kick in?
In Florida, most policies start anywhere from zero to 180 days after a person is no longer able to perform two activities of daily living. This is called an elimination period. It’s important to calculate how many days a person can pay during this period before the coverage starts. After receiving benefits, many insurers will allow a customer to stop paying premiums.
What is the State Partnership Program?
The program helps protect assets of customers who also seek benefits from Medicaid. Florida participates in this program, but not all states do.
What this means is that in return for purchasing a partnership policy, a customer’s assets will not be considered when the state determines his or her eligibility for long-term care services under Medicaid. There is no cost associated with the partnership policy, and customers don’t have to worry about spending away their assets to qualify.
Why shouldn’t I get it?
If a person has enough savings to cover healthcare, they might not need long-term care insurance. Nursing home care costs around $50,000 a year nationwide, according to a guide published by the Office of the Florida Chief Financial Officer Jimmy Patronis.
Erin VanSickle, deputy chief of staff of Florida’s Office of Insurance Regulation, said her office is “cultivating a marketplace that makes insurance products […] reliable, affordable, and accessible.”