What You Should Consider Before Investing in Long-Term Care Insurance

Long-Term Care Insurance

Seniors are increasingly investing in long-term care insurance, known colloquially as LTCI. The popular financial option can benefit those living in assisted living facilities. However, LTCI also benefits seniors who choose to age in place. As we age, most people will come to need help with certain everyday activities. LTCI can provide seniors and their loved ones with essential care and desired peace of mind.

When you invest in LTCI, it can help you in different ways. The insurance can provide you with assistance for eating, getting dressed, bathing, and personal hygiene. You may never need to use your LTCI, but nonetheless, it may still make good sense to have the option available to you if you should ever need it.

A medical alert system complements LTCI extremely well. Both solutions can help seniors age in place on their own terms. At Alert1, one of our main goals includes helping seniors age independently and with dignity. We have designed our medical alert technology with seniors in mind to help meet their quality-of-life expectations.

What Is LCTI?

Long-term care insurance is a financial product that can benefit seniors. The insurance can help individuals cover the costs associated with home care services. LTCI also helps cover an extended stay in a nursing home, memory care facility, assisted living residence, or hospice. However, many people in the United States have limited access to LTCI.

In October of 2020, the National Association of Insurance Commissioners estimated that fewer than 1 in 30 Americans owned a LTCI policy. Only about 7% of adults who were over the age of 50 owned a policy. Overall, the study found that since 2008, the raw figure of 7.5 million insured individuals has barely budged, even as the aging population continues to swell.[i]

Seniors should also know which services LTCI does not cover for them. These types of services can include:

  • Hospital care
  • Care for self-inflicted injuries
  • Care for specific pre-existing conditions like dementia, diabetes, or HIV-related illnesses
  • Care for illnesses or disabilities resulting from war
  • Treatment for self-induced drug addiction or alcohol abuse

Most LTCI plans are comprehensive.[ii] Seniors or their loved ones should explore different options that work best for them. The same guiding principle applies to when seniors or their loved ones explore medical alert technology plans. Our medical alert devices come with different features and plan options for members.

Alert1 offers both monthly and long-term plans to members, but there are no contracts to lock anyone in. Plus, members can switch their plans as they please, and adjust to meet any lifestyle changes. 

How Much Does LTCI Cost?

Long-term care insurance premiums differ based on multiple factors.[iii] Some factors that can influence the policy’s price include the benefit amounts, elimination period, and the types of coverage that the individual selects.

Age, existing health, and whether you select a single or combined policy can also influence LTCI rates. You will also find that the policy rates differ from company to company, even with similar outlined terms. That is why you should ultimately take the time to explore all the different policy options.

Nonetheless, there are some ways to gauge your expected LTCI rates. As of 2018, a single man might pay about $156 per month. Meanwhile, a single woman might pay $247 each month. A “shared care” policy for a married couple would cost about $250 per month. The maximum life benefit would reach $386,500 for a single or married person by the age of 85.

Insurance companies selling these premiums will generally charge women much higher rates because women tend to live longer. As a result, women will require more long-term care. The companies also offer the best deals to married couples, particularly those who are close in age. Seniors should note that purchasing a policy earlier is better. The younger that you are when you invest in an LTCI policy, the less you will need to pay for your future premiums. 

What are the Pros and Cons of LTCI?

 You may find yourself wondering whether you really need long-term care insurance. While LTCI policies are not one-size-fits-all solutions, there are some important reasons to invest in them. You should consider getting a policy if you are not wealthy or if you are certain you can afford to pay rising premiums. It’s also good to get a policy if you have valuable assets that you want to leave to your heirs.

Still, you will find pros and cons to purchasing LTCI. The pros include:

  • Preserving assets: You will likely drain your savings if you pay out-of-pocket for long-term care. Seniors often sell their homes and liquidate their assets to afford long-term care without LTCI. If you wish to age in place, a LTCI policy can preserve the assets that matter most to you.
  • Maintaining independence: Without sufficient funds to pay for home care, seniors will sometimes have to move into a care facility. Staying in your own home can help you to preserve the freedom you have grown accustomed to in your adult life.
  • Preventing familial disputes: If you need long-term care, your family may have many different ideas of what that should look like for you. Establish a plan before you need it. That way, everyone will know how to pay for the care in the future and how to divide the responsibilities.

For your own balanced considerations, here are the cons for purchasing a long-term care policy:

  • Unaffordable premiums: Many insurance providers can alter the terms of their long-term care policies even once individuals start paying their premiums. Some companies increase their policies by 85% or more.
  • Lapsed policies: The Center for Retirement Research at Boston College has found that 38% of women and 32% of men with LTCI at age 65 will let their policies lapse. You will forfeit your benefits if you stop paying the premiums. In some cases, it happens when a senior suffers from a cognitive decline. However, seniors will also stop paying if their policies become unaffordable. If that happens, the policies become a waste of money.
  • Unused large claims: Many seniors with LTCI die from medical conditions like cancer or heart disease that can progress quickly. Others may only seek a limited amount of long-term care. Ultimately, it is possible to pay a large amount for a policy you might never use or need.

Are There Any Alternatives to LTCI?

If you have enough savings, you may be able to fund your own long-term care. Alternatively, low-income seniors will typically qualify for Medicaid. However, those who financially fall within the middle class may encounter difficulties in finding ideal long-term care funding solutions. A legal or any financial planning professional may recommend these alternatives to LTCI:

  • Medicare: If you get on the federal government program, they cover long-term care, but under limited conditions. Medicare pays for 20 days of care if you go to a skilled nursing facility, but their coverage comes with additional prerequisites. Medicare will also cover hospice care.
  • Investing: You do not need to necessarily invest your money toward LTCI premiums. Instead, you can make responsible investments in stocks and bonds. Start investing earlier to get greater returns in the future. Still, make sure to remember that investing money is always risky.
  • Your Home Equity: Some seniors may realize that they have a lot of home equity. If that applies to you, you can possibly draw from it. By doing so, you can at least partially pay for your long-term care costs. Consider a home equity line of credit or perhaps a reverse mortgage. Always speak first with a reliable financial expert to avoid choosing the wrong option for you.

How Can a Medical Alert System Fit into a LTC Plan?

A good medical alert system can complement a long-term care plan well. Seniors who purchase LTCI are better positioned to age in place. But even with care, you can experience an accident and require assistance.

Alert1 medical alert technology connects each of its members to an emergency Command Center staffed with trained agents. These agents each hold a variety of certifications and will stay on the line with you until help arrives.

Seniors should look into medical alert products that complement their daily lifestyle and budget. Even those with full mobility can benefit from having a medical alert device. Like LTCI, a little peace of mind can go a long way for you and your loved ones.

 

 

[1] Sammon, Alexander. 2020, Oct. 20. The Collapse of Long-Term Care Insurance. The American Prospect. The Collapse of Long-Term Care Insurance.

[2] Lee, Jeanne. 2020, Feb 21. Is long-term care insurance worth it? How to decide. PolicyGenius.com. Is long-term care insurance worth it? How to decide.

[3] Stark, Ellen. 2018, Mar. 1. 5 Things You Should Know About Long-Term Care Insurance. AARP.org. 5 Things You Should Know About Long-Term Care Insurance.