Long term care refers to assistance with the very basic, everyday activities that most of us can do for ourselves. We call them ADLs or Activities of Daily Living. As a result of illness, injury or advanced age, many people need assistance in order to eat or dress or bathe. The need for long term care may also result because a person has cognitive impairment. Some people need supervision or reminders to accomplish every day activities, such as using the toilet, eating, bathing, dressing, and so forth.
What is Long-Term Care Insurance?
Long-term care is provided to people who are unable to perform the basic tasks of everyday living on their own for an extended period due to chronic medical, physical or cognitive conditions, or disabling injuries. Long-Term Care Insurance covers long-term care services provided in a nursing home, at home, in an assisted living facility, or in other community-based settings. Medicare, Medicare supplemental insurance (Medigap), and traditional health and disability insurance plans typically do not cover long-term care services.
What is the Average Cost of Long-Term Care?
Today, the average cost of staying in a nursing home can be very expensive, often over $90,000 a year. Home care can be very expensive as well. Few people can afford this cost without using their life savings. Long-Term Care Insurance allows you to protect your assets in the event you need long-term care sometime in the future, just like you protect yourself with homeowner and auto insurance.
How Much Does Long-Term Care Insurance Cost?
Long-Term Care Insurance premiums are determined by many factors. Factors include: age, health, benefit and optional riders selected. The premiums charged for tax-qualified Long-Term Care Insurance Policies are treated as medical expenses under Federal tax law which may also qualify you for a more favorable outcome on your tax return. You should check with the insurance carrier to determine if your plan is tax-qualified and consult with an attorney, accountant or tax advisor regarding the tax implications of purchasing a tax-qualified policy.
Who Pays for Long-Term Care?
About half of all long term care expense is paid by state Medicaid programs. About one-third is paid out of pocket by individuals and their families. Medicare only provides for some skilled care in some limited situations. Neither Medicare supplemental insurance nor major medical coverage provided by most companies pays for long term care. This leaves approximately one sixth of the total cost to be covered by other government programs and private insurance.
Does Medicaid Pay for Long-Term Care?
Yes, but in very limited situations. Medicaid will generally apply only to those with very low incomes and very few assets. Even then, there is only limited choice of what and where benefits will be provided. For example, there might be limited choice of physician and facility, no control over the number of people sharing a room, or no ability for the family to pay for any extras.
Does Medical Insurance Pay for Long-Term Care?
Although medical insurance has some aspects of long term care, they are not the same thing. For example, some medical plans may pay for the services of a nurse while you are recovering from an illness or an injury that requires medical attention. This medical benefit is very limited. Once you are better or reach the maximum benefit for nursing services, this benefit would cease to be available. Medical insurance is not designed to cover activities of daily living. Long term care insurance is designed to cover activities of daily living.
Insurance vs. Self Funding Calculator
Hypothetical Example of a Life-Based “Hybrid” LTC Product
Premium of $10,000 per year for 10 years, 60 year old male,
3% compound inflation, 6 year initial pool of LTC benefits
One of the advantages Life Based Hybrid LTC insurance is that this plan will always pay a benefit. The plan builds a pool of LTC benefits if you need it, pays a death benefit or provides a money back guarantee. These plans also often provide a guaranteed minimum residual death benefit should you use all of your LTC pool. So whether you have an LTC claim, decide in the future this isn’t the right protection for you or die before you use benefits, hybrid products always provide you with a benefit.
Leverage on Long-Term Care Premiums
Total Premiums Paid Over 10 years = $100,000
$10,000 per year x 10 Years
Day 1 More than 3.4x Total Premiums Paid for Long-Term Care
Day 1 Total Long-Term Care Benefits = $340,000 $4,382 Monthly Long-Term Care Benefits
Age 80 More than 6x Total Premiums Paid for Long-Term Care
Age 80 Total Long-Term Care Benefits = $614,265 $7,914 Monthly Long-Term Care Benefits
Benefits if Long-Term Care is Never Used or Exhausted*
Death Benefits Paid to Beneficiaries if LTC is Never used
Day 1 = $105,158 Age 80 = $105,158
Money Back if LTC is Never Used
Day 1 = $6,359 Age 80 = $73,281
Residual Death Benefit
(Minimum life insurance proceeds paid to beneficiaries even if LTC pool is fully depleted)
* The Guaranteed Death Benefit and/or Surrender Value (“Money Back”) will be reduced by any LTC benefits used.
The Residual Death Benefit is paid even if LTC benefits are exhausted.
No group code?
No problem . . .
Please contact the LTCRplus benefits concierge for enrollment assistance at (844) 582-7587
Hybrid Annuity / LTC Insurance
Advantages
Maximum liquidity
Always pays: LTC, death benefit, or return of premium
Guaranteed premiums and benefits
Least invasive underwriting
Disadvantages
More expensive due to annuity component
Life insurance w/ Accelerated LTC Rider
Advantages
Provides death benefit with some degree of LTC coverage
Disadvantages
Less leverage for LTC benefits
Not designed specifically for LTC
Lowest ability to customize LTC benefits
Hybrid Life / LTC Insurance
Advantages
Maximum liquidity
Always pays: LTC, death benefit, or return of premium
Guaranteed premiums and benefits
Disadvantages
More expensive due to life insurance component
Stand Alone LTC Insurance
Advantages
Maximum LTC leverage
Guaranteed benefits
Greatest ability to customize
Built specifically for LTC
Disadvantages
No residual value if benefits are unused
Premium could increase on a class basis with prior state approval
More difficult to health qualify
Need Assistance?
We’re here to help . . .
Please contact the LTCRplus benefits concierge for assistance at (844) 582-7587