Long-term Care Insurance

Do you need it?

long-term careA few things that might surprise you.


Several days after getting foot surgery, Jessica Mulgrew of Arlington, Texas, discovered two holes in the repaired foot. She immediately went back to the doctor, where he discovered two separate staph infections. Jessica nearly lost her foot, and could have died from the infections.

The complications to her foot meant that she needed around-the-clock care. Fortunately for her, she was insured through a long-term care insurance policy.

What exactly is long-term care (LTC) insurance, what does it cover? Here are 5 facts that might surprise you:

  1. Long-term care is not just for the elderly. When most people think of assisted living, they envision gray hair and wheelchairs. But younger people can become disabled, too. Disease, mental illness or injury can result in the need for daily medical care, personal assistance or social support services. According to Family Caregiver Alliance, 37% of people in long-term care are age 64 or younger. As a general rule, if someone is unable to perform 2 of the 6 “activities of daily living” (bathing, dressing, eating, toileting, transferring and continence) they qualify for long-term care.
  2. Medicare does not cover long-term care expenses. If you’re over 65, you may think that Medicare has you covered. Though Medicare will cover your health expenses (medications, procedures, etc.) it does not cover custodial care. Your health insurance or supplement policies won’t help, either. These policies generally contain strict limits on the amount of recuperative time they will cover. If you are impoverished (or expect to be) then you may be able to rely on Medicaid. It will cover long-term care, but only once all your personal assets have been tapped.
  3. Your retirement savings are probably not enough. According to an article published on AARP.com, if you live to reach the age of 65, you’ll have about a 50% chance of needing long-term care at some future point. And it will cost you—about $140,000 on average. Though rates vary based on the type of care and the setting, expenses can easily exceed $7,000 per month, per person. Most people, when planning for retirement, are not taking that into consideration.
  4. Long-term care and disability insurance are not the same. You may already have disability insurance, but don’t expect it to cover nursing home or lengthy rehabilitative care. Disability insurance is designed to replace a portion of your salary, if you are unable to work due to illness or injury. It will not cover the costs of long-term care, regardless of your age or employment status.
  5. Your current health and age will impact the cost of a long-term care policy. LTC insurance, like other insurance products, is priced based on risk. Insurance companies need to insure enough healthy people to subsidize the costs of those who require lengthy and expensive care. If your health history has some blemishes, you can expect to pay higher premiums. Some people may be unable to purchase a policy at any cost. The American Association for Long-Term Care Insurance (AALTCI) recently reported that 20% of individuals under the age of 50 had their applications denied. For those over 70, the rejection rate rises to 44%. The best time to buy an LTC policy is when you are young and likely to be in peak health.

The early bird gets the worm
As with any type of financial planning, it’s best to start thinking about potential long-term care well in advance of when you might need it. Coverage options are complex, so it’s best to consult with a licensed insurance agent or financial planner. Choices typically fall into one of these two categories:

  • Purchase a stand-alone LTC policy. These work like most other types of insurance. Premiums are typically paid annually, and coverage is subject to policy terms. Most policies enforce a waiting period of 3 months and a maximum three years’ worth of coverage. You’ll have peace-of-mind knowing your daily care will be covered, but if you end up not needing long-term care (a good thing, right?) there is no additional value to the policy. The other downside—policy rates are generally set for only one year. They can go up (and often do) as you get older.
  • Add a Long-term Care Rider to your life insurance policy. A permanent life insurance product allows the money you invest to build up over time. Adding an LTC rider will allow you to accelerate the death benefit to pay for long-term care costs, should you need them. Upon your death, any remaining benefits are paid out to your heirs. Options vary greatly, but there are two basic classifications to choose from:
    • Reimbursement plans pay only qualifying LTC costs, and do not cover expenses such as home modification or equipment needs (such as walkers.) Receipts must be accounted for every month.
    • Indemnity plans allow for greater flexibility. Once you qualify for LTC, benefits can be used to cover a variety of costs associated with care (home cleaning and maintenance, for example.) You can tap the entire benefit, or use only what is needed.

According to AALTCI, the best time to purchase a long-term care policy is in your mid-50s. But people under 50 can still benefit from adding long-term care planning into their investment strategies.  Jessica Mulgrew was certainly glad she did. Her foot surgery complications severely limited her mobility. Because she had a long-term care policy, she was able to pay for daily help in dressing, cooking and cleaning. Regarding long-term coverage, “if you have to beg, borrow or steal…  get it,” she says. “You never know what’s going to happen to you.”

Though we don’t advocate stealing, General Southwest is committed to helping our clients examine their options for long-term care coverage. Our experienced advisors will help you make a decision that’s right for you and your family’s financial situation. A call to us today can give you peace-of-mind down the road.


Information courtesy of Zywave, Inc., AALTCI.org, Nationwide Insurance and AARP.com

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