A Senior’s Guide to Long-Term Care Insurance

Have you considered getting long-term care insurance? This is an important issue for senior citizens. Many seniors can expect to live in a senior living community at some point in the future. In fact, 7 out of 10 seniors need assisted living or more advanced care (1). However, senior living communities can be expensive, with prices per month averaging more than $4,800 according to some statistics (2). While this cost varies widely and includes transportation, utilities, meals, entertainment, and more, it’s still a steep cost for many. It also really adds up over time. No one wants to be a financial burden on their children or relatives, but not everyone feels they can afford these costs. 


Long-term care insurance is a great solution to this problem. It will provide you and your family with peace of mind for the future. It also ensures you’ll be able to afford whatever care you need. Keep reading for our senior’s guide to long-term care insurance.


What is Long-Term Care Insurance?


Just like it sounds, long-term care insurance is a type of insurance coverage you can purchase. It is intended to help you manage the costs of any long-term care you might require in the future. Typically, this covers assisted living communities, memory care communities, or skilled nursing care. Fully independent living in senior living communities, without any assistance, is typically not covered. Requirements, exclusions, fees, and coverages may vary between policies, so make sure to read any fine print.


When Do You Need Long-Term Care?


Most seniors need long-term care when they can no longer manage activities of daily living (ADLs) themselves. This might include:

  • Needing help with dressing, bathing, grooming, or mobility
  • Housework
  • Cooking
  • Transportation
  • More advanced medical needs.

You might also need long-term care if you have or develop a memory loss disorder like Alzheimer’s or dementia, chronic illness, disability, or cognitive impairment.


Long-Term Care vs Short-Term Care


Long-term care differs from short-term care because it is expected to continue for an indefinite amount of time. It could be the remainder of your or your loved one’s life. Long-term care typically refers to care with activities of daily living (ADLs), as described above, or advanced medical care.


Short-term care (typically defined as less than 100 days) may be necessary when recovering from a surgery, injury, or illness. Short-term care includes rehabilitation services, such speech therapy, physical therapy, or occupational therapy. You could receive these services in a hospital, in a skilled nursing or assisted living community, or at home.


Medicare and Medicaid Insurance Coverage


Medicare will often cover short-term care needs, like a hospital stay, rehabilitation services, or a short-term stay in a skilled nursing community. However, Medicare does not cover long-term care needs, like assisted living or a long-term stay in a skilled nursing community. 


Currently, Medicare Part A beneficiaries get the following coverage for stays in a skilled nursing community or hospital:

  • Days 0-20: typically covered with $0 copay
  • Days 21-100: $204 per day copay
  • Past Day 101: No coverage


So, Medicare will really only cover care for up to 20 days. After that, it becomes extremely expensive, and after 100 days Medicare does not pay any of the costs.


Medicaid does not officially cover assisted living or other types of long-term care, except for individuals who require skilled nursing care and who are below a certain income and asset level. However, some Medicaid beneficiaries in some states can receive waivers to help cover some of their assisted living, skilled nursing community, or memory care costs. Find out more about what Medicaid will cover here.


Long-Term Care Insurance Coverage & Costs


Since Medicaid rarely covers all of your long-term care costs, and isn’t available to those above a certain income level or asset level, long-term care insurance is really the best option to make sure you’ll be financially secure if you end up needing long-term care, as the majority of people over the age of 65 do. It can also prevent you from needing to use all of your retirement funds, assets, or life insurance policy to pay for your long-term care.


Once you buy a long-term care insurance policy, there will be a waiting or elimination period before you can get benefits–typically 90 days. After that, long-term care insurance policies usually cover you as soon as you can no longer safely perform the activities of daily living discussed earlier. This coverage typically has a daily or monthly cap on the amount that will be paid out, and it could last either a certain number of years or for the remainder of your life. These amounts and lengths of time will depend on the policy you purchase.


How much long-term care insurance costs and pays out varies widely. For a 65 year old woman, an average long-term care insurance plan will cost $2,700 annually, and pay out a maximum of $165,000 worth of coverage. For a 65 year old male, the same plan will cost $1,700 annually on average. A couple over 65 can expect to pay $3,750 annually for a plan with a $165,000 max benefit. The annual costs are significantly lower for people between the ages of 55 and 64. 


Pros of Long-Term Care Insurance

Long-term care insurance has some real advantages for many seniors.

  • If you do need long-term care, you will pay far less than the benefits you receive.
  • Long-term care insurance provides significant peace of mind and financial security for both you and your loved ones.
  • You will not have to deal with complicated Medicaid paperwork to receive coverage. 
  • You can preserve your assets and life insurance policy, if you want to leave a financial legacy for your descendants. 


Cons of Long-Term Care Insurance

There are also disadvantages to long-term care insurance.

  • Long-term care insurance does include monthly payments (premiums) before you start receiving care. These can increase as you get older. 
  • If you ever stop paying your premiums (before you need long-term care), you’ll lose coverage and receive no benefits from all of the premiums you’ve paid over the years.
  • If you are already struggling to pay for your basic needs, you may not be able to afford long-term care insurance.
  • Long-term care insurance policies may not cover everyone in every situation. They typically come with “fine print” exceptions.


Hybrid Policies


Newer long-term care insurance policies are often bundled with another benefit, like life insurance. With a hybrid policy, the premiums you pay can either go to your long-term care or to a life insurance benefit. With some policies, the life insurance payout will get smaller the more long-term care you need. This way, if you never use long-term care, or don’t use it for long, the money you have paid becomes a life insurance payout for your spouse, children or other beneficiaries. 


However, these policies are more expensive than long-term care insurance on its own, and the life insurance payouts are often smaller than standard life insurance policies without long-term care insurance.


Do I Need Long-Term Care Insurance?

While most people will need long-term care, not everyone will benefit from long-term care insurance. Here are a few things to consider when deciding if long-term care insurance is the right choice for you.

  • Your age and health. If you are between 55 and 64 and in good health, a long-term care insurance policy may be inexpensive and well within your budget. Consider a hybrid policy if you think you might never need long-term care.
  • Your budget and income level. Your insurance premiums shouldn’t take more than 7% of your income. If you have lower income, Medicaid is more likely to cover you, so long-term care insurance might not be worthwhile.
  • Assets. If you want to protect your assets for your descendants, and you have more than $75,000 in assets not counting your primary home, long-term care insurance might be a good choice. If you have less than $30,000 in assets in addition to your home, you’re may pay more than that in long-term care insurance.
  • Your financial planning preferences. Do you want to leave a substantial inheritance to your family members, or are you okay with spending all of your savings, retirement, and assets? Either decision is okay, it just comes down to personal preference.
  • The available policies and their associated costs. What policies are available to you? How much will you pay in premiums, and how much will they pay out? Make sure you get quotes from a wide variety of insurance companies to be sure you’re making an informed choice. 


Long-Term Care Insurance: Is It Right for You?


The bottom line is: most people will need long-term care at some point, but long-term care insurance may not be right for everyone. There are many things to consider when choosing whether or not to get long-term care insurance, and how much you’ll need. Stellar Living hopes this senior’s guide to long-term care insurance helps you make your choice!

Considering senior living? Find a Stellar Living Community near you today.