Long-Term Care Insurance
Should You Purchase Long-Term Care Insurance?
When an individual is considering whether or not to purchase Long-Term Care Insurance, the question must be answered with questions:
- Is long-term care insurance right for you?
- How likely is it that you will need long-term care services?
- How much can you afford to pay for long-term care services?
- How much can you afford to pay for long-term care insurance, both now, and in the future?
An individual's chances of needing long-term care services vary depending on age, health status and health history, family health history and longevity patterns, lifestyle habits regarding exercise, diet, and smoking, and gender. Women have a greater chance of needing long-term care services because they generally live longer than men and are more likely to live alone when they are very old.
Long-term care services are expensive. Seventy-five dollars per day is a low-cost estimate for personal care service from a home health aide for a two-hour visit to your house. The approximate average annual cost of nursing home care is $50,000. Figuring the cost of long-term care will depend on the amount and type of care you need, as well as where you receive that care. Long-term care may be paid for using personal resources, Medicaid, Medicare and Medicare Supplement Insurance, or Long-Term Care Insurance.
Medicaid pays the largest portion of our nation's long-term care costs, but Medicaid will pay your nursing home or home care expenses only if you meet low-income and limited-assets eligibility requirements. Please note, however, that there are special Medicaid rules for the protection of income and resources, including the home of a person whose spouse is in a nursing facility.
Medicare conditionally pays 100% of skilled nursing facility care for the first 20 days. You will be responsible for paying up to $101.50 in coinsurance for the next 80 days. Medicare's skilled nursing facility coverage ends after the first 100 days. Medicare may pay for home health care if qualifying conditions are met. Medicare Supplement Insurance generally only covers the policyholder's portion of a Medicare covered benefit. Medicare and Medicare Supple ment Insurance should NOT be relied upon to pay for long-term care, as qualifications must be met to initiate limited benefits.
Long-Term Care Insurance is the other option for payment of long-term care. You should NOT buy long-term care insurance if your only source of income is a Social Security benefit or Supplemental Security Income (SSI); if you have limited assets; if you often have trouble paying for utilities, food, medicine, or other important needs; if you can't afford the premiums; and/or if the policy you can afford doesn't offer enough benefits to make it worthwhile.
You should consider buying long-term care insurance if you have significant assets and income that you want to protect, and if you want to stay independent of the support of others and pay for your own care. Guidelines for deciding in favor of buying long-term care insurance are generally considered to be having between $100,000 and $1,000,000 in assets (not counting the value of your home or car), and atleast $25,000 annual retirement income for each individual.
Insurance is purchased to protect individuals and families from financial loss. Those who purchase long-term care insurance should prepare to pay relatively small regular premiums in order to protect the assets they have accumulated over a lifetime.
Purchasing a long-term care insurance policy allows the insured person to receive services where and how they want them. This could be in their own home, in a continuing care retirement community, or in a nursing home. Some nursing home admissions policies require a person to have sufficient assets (which may include insurance) and/or income to ensure payment of the facility's rates for a minimum period of time, such as two or three years.
You must consider how much your income is now and how much you can afford to spend when buying a long-term care insurance policy. You will also need to consider your future income and living expenses, and your future ability to pay the policy's premium. A guaranteed renewable policy does not guarantee that you can renew at the same premium. A 65-year-old person should expect to pay as much as $2,000 in annual premiums for a long-term care insurance policy with inflation protection. The premium will vary according to the policy purchaser's age (lower if you're younger, higher if you're older), amount of daily benefit, length of benefit period, and whether or not a home health care benefit is included. Premiums can increase 25% to 40% with inflation protection, and 10% to 100% with nonforfeiture benefit options added to the policy. Whether a policy is tax qualified, with premiums that may be deducted and benefits not counted as income, is another planning consideration.
Agents are required to provide you with a copy of the National Association of Insurance Commissioners' A Shopper's Guide to Long-Term Care Insurance. The Pennsylvania Insurance Department's An Overview of Long-Term Care Insurance provides additional information and worksheets for you to use in comparison shopping. An up-to-date list of Approved Long-Term Care Policies in Pennsylvania will assist you in locating insurance companies and inform you if those companies offer tax-qualified policies. Apprise, Pennsylvania's State Health Insurance Assistance Program, has counselors who can provide you with these materials as well as review these considerations with you, but ultimately the decision is yours. Most importantly don't feel pressured! Pennsylvania has a mandated 30-day free look provision for long-term care policies. This allows you 30 days from purchase to review and return a policy should you change your mind.