Long-term care insurance can be an emotional topic. It's not exactly something you want to talk about at the table. After all, no one wants to think about themselves or their loved ones so they can't live on their own. But if you want to make a smart financial decision and protect your savings, long-term care insurance is a must!
To illustrate this, let's take Steve and Rachel, for example. They weren't always smart with money, but they worked hard and saved $ 300,000.
When Steve was 67 years old, he developed Alzheimer's disease. At first, it wasn't too bad. Rachel used some of her eggs to hire a home care professional to help Steve a few hours every day. But as her condition deteriorated, Steve had to go to a nursing home. Sadly, after five years at home, Steve passed away. Rachel, now 72, is healthy for her age, but has to work full time because her husband's stay in a nursing home has eaten most of her eggs.
Unfortunately, Steve and Rachel's story is not unique. It happens to a lot of people every year. But with long-term care insurance you can prevent it from happening to you!
What is long-term care insurance?
Long-term care insurance is basically life or nursing home insurance. It pays for the long-term care (LTC) services that some people will need as they age or get sick and need help with daily tasks like dressing, bathing, and more.
And long-term care can be very expensive, very expensive. According to the Alzheimer's Association, the estimated cost of end-of-life care in 2019 ranged from $ 233,000 to $ 367,000. 1 Most health and disability insurance does not cover long-term care, but long-term care insurance does.
Finding an independent insurance broker who handles purchases for different long-term care companies and gets quotes can save you thousands of dollars and a lot of unnecessary worry.
What does long-term care insurance cover?
- Home nursing care
- Auxiliary living facilities
- Childcare services for adults
- Home care
- House modification
- Coordination of care
Not all policies are created equal, so talk to your independent insurance agent to find the one that best suits your needs.
Why do you need long-term care insurance?
Did you know that 14 million adults require long-term care services in 2018? Buying long-term care insurance can give you peace of mind and protect the savings you've worked so hard to build. You will know that if you get sick, you can pay for the care you need and still have enough money in savings for you and your partner to eat. Also, your children will not have to pay large payments for their care.
Now you might be thinking: What about government programs? Can't they help? Don't make the mistake of believing that Medicare will cover the costs of long-term care. No. And while Medicaid, the government program designed for people who don't yet have money, will cover long-term care expenses, it should never be your first choice.
Side note: It is common for people to try to trick the system by transferring assets from their parents' name so that the government will pay for LTC without touching those assets. This is fraud, a federal crime, and the government will sue it! Don't fall into this trap.
Types of long-term care insurance
Conventional long-term care insurance
Conventional long-term care insurance is a simple, stand-alone policy. All you do is offer to pay for long-term care services when you need them. This is!
When does traditional politics begin? This policy goes into effect when you are unable to perform two of the six activities of daily living (such as dressing, bathing, eating, or moving around in a wheelchair) or if you suffer from severe cognitive impairment. After a waiting period of 30 to 90 days, your benefits should begin to show.
Well, let's break it down. The average cost of a semi-private nursing home nationwide is $ 90,155 per year. The cost of assisted living is $ 48,600 per year and home health aides charge $ 144 per day. This is expensive! Traditional long-term care insurance ensures that no matter where you need care, you will have money to cover at least part of the bill. This way, a prolonged stay in a nursing home is less likely to drain your savings or destroy your possessions.
The average annual insurance premium for long-term care for a couple in their 60s is about $ 3,400 (or about $ 283 per month). 4 In terms of payment, a typical long-term insurance policy provides a home care benefit of $ 160 per day for hospice care for a specified number of years (three are the most common). Also, you can add an inflation rider that increases your payment over time, usually by 3% per year (but fair warning, it will probably cost you a bit more).
Life care and long-term policies
Another option is a policy that combines life insurance with long-term care coverage. With a hybrid policy, you can access death benefits (money that beneficiaries would receive in the event of your death) while you're still alive to pay for long-term care.
And if you don't need care in the end, your heirs will get the full amount. The rates are "irrevocable", which means that the premiums are fixed for life.
But be prepared: the price of a hybrid policy is usually thousands of dollars more than the conventional policy. This is because you are also buying life insurance that you may not need even with LTC coverage. And unlike conventional long-term care insurance, premiums for hybrid insurance are not tax deductible.
As with all life insurance, insurance companies invest money in your insurance policy. The problem is that they are not making good investments and their returns will hardly keep up with inflation. This loss of benefits could end up making hybrids the most expensive long-term care policy in history.
That is why mixed politics should generally be the last resort. The only time you might consider buying one is if you don't qualify for a traditional long-term care insurance policy due to a medical underwriting. If not, buy life and long-term care insurance separately - don't try to marry the two of them!
When to buy long-term care insurance
Well, Dave suggests waiting until age 60 to buy long-term care insurance because the likelihood of you filing a claim before that time is minimal. So you'll want to buy a long-term endorsement policy as a gift for your 60th birthday! Statistically, 95% of LTC claims are served by people over the age of 70.
You can assume that you would pay less if you bought your policy at age 50 and kept a lower monthly premium instead of waiting until age 60. But Dave will never tell you to buy something based on the amount of the monthly payment. This is what broke people, right? It's about what you need, when you need it.
50 vs 60 years: does it matter when you buy?
While buying an LTC in your 50s may seem cheaper, the numbers tell a different story.
The estimated LTC premium for a 50-year-old man is $ 1,657 per year. If the policy remains in effect until that person turns 95, they can spend approximately $ 74,565 in LTC fees. For a healthy 60-year-old man, the premium is $ 1,811. If you keep the policy until age 95, it could cost you $ 63,385 in total.
You can already see how buying at 60 is a better deal! But what if you invest $ 1,657 a year until age 60 instead of buying LTC at age 50? You can have almost $ 30,000! If you keep this money invested until the age of 95 and never add anything, you probably have more than $ 1.3 million! This is not bad at all!
Many people worry that if they wait until age 60 to purchase LTC, they will develop a medical condition that will prevent them from qualifying for coverage or drastically increase their premiums. If you have a family history of illness at a young age, or are losing sleep because you are worried about getting sick and not being able to pay for care, buy LTC when you can. Your peace of mind is worth more than any money you save on premiums. Just don't buy LTC from a young age because you think you will save money by doing so.
As you can see above, this is not true.
Work with an independent insurance agent
Well, what is the best way to get long term care insurance? See an independent insurance agent. They will search through many different insurance companies to find the best rate for you based on your location, situation, age, health, and other factors. Long-term care is an important decision, so be sure to have a professional in your class!
Comments
Post a Comment