Arvest Education Center

Long-Term Care Insurance

As medical costs and life expectancies continue to rise, many Americans are worried about paying for the expense of living a longer life. Will medical expenses deplete their savings? What level of care will they be able to afford? Can they choose who provides the service and where?

Long-term care insurance provides a convenient way to safeguard against these concerns. This type of insurance puts the insured in a better position to get the care and services needed. Long-term care insurance also provides a greater opportunity to choose the type and level of care from a preferred provider.

Government programs, such as Medicaid and Medicare, often cover medical expenses for seniors. But qualification restrictions and coverage limitations sometimes result in being unable to use these programs or require depletion of personal savings before doing so.

The main advantages of carrying long-term care insurance include:

  • Ability to choose services and provider
  • Protection of assets
  • Better position to leave assets to heirs
  • Puts insured in more control of financial future

The Costs of Long-Term Care

Several studies have found a year’s stay in a nursing home can exceed $50,000. Even the cost of having a skilled in-home professional provide care three times a week can exceed $15,000 annually, depending on the type of care. While life expectancies are increasing, the amount of care needed (and its cost) seems to be increasing even faster.

Paying for Long Term Care

Neither Medicare nor private medical insurance covers most long-term care costs.  Medicare pays for some special services, but most people receiving long-term care need help with non-covered activities like bathing, dressing and eating. 

Medicaid covers nursing home care, but functions like a safety net-type program. To get Medicaid help, you must meet federal and state guidelines for income and assets.  Many people start paying for care out of their personal assets and then qualify for Medicaid when their personal assets are depleted. While some assets and income can be protected, by the time you qualify for Medicaid, you may have used up most of the assets you had hoped to pass on.

Guidelines

  1. Consider buying at age 50. Younger than that, you probably do not need it and older than that, you may have a condition that could prevent you from qualifying or result in higher premiums. The earlier you buy the coverage, the lower the premiums should be.
  2. Only consider a financially sound company. You may qualify for benefits for a long time and you want the insurance company to be around when you need it. You can get ratings reports on insurance companies from your agent or at the library.
  3. Review the expenses covered by the policy. Some policies provide coverage for only some services, a limited period of time or only up to a certain total dollar limit.  As you would expect, the more services covered, the higher the premium.
  4. Get the needed coverage. Many experts suggest at least three years of coverage.  While three years in a nursing home today may cost $150,000, be sure the policy you are considering protects you against medical cost inflation.
  5. Review the elimination period. This refers to the amount of time between when you start receiving care and when your insurance starts paying.
  6. Understand the eligibility requirements.
  7. Make sure the policy is guaranteed renewable. This does not necessarily mean that your premiums will not rise. It does mean you still can get the coverage.

This content has been provided by Practical Money Skills and is intended to serve as a general guideline.