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Long-Term Care Insurance: Do You Need It?

Jun 07, 2017 3 min read by Kevin Johnston

 

Imagine you are 64 years old and you are looking forward to a relaxing retirement of playing golf, visiting your grandchildren and enjoying some travel. Suddenly you are diagnosed with a disease that will require you to have constant care on a permanent basis.

Your Social Security income won’t cover your long-term care expenses, and Medicare only covers visits to a doctor’s office, prescriptions and hospitalization for conditions that are treatable. Health insurance does not cover long-term care either. Medicaid would have covered some of your long-term care needs, but you don’t qualify for it in your state. Though you could turn to your family for help with your personal needs, you don’t want to burden them.

What will you do?

 

Can’t I pay for long-term care with retirement savings?

Even if you have retirement funds, most financial professionals recommend that you withdraw no more than 4% each year. This can help you avoid using up the principal. However, that 4% goes toward housing, food, utilities and other payments. Expensive long-term care could keep you from paying for basic expenses and may even force you to spend all your savings.

Long-term care insurance could help you avoid this dilemma

 

 

 

What can long-term care insurance do for me?

Long-term care insurance reimburses you when you need help with personal activities such as bathing, dressing and eating. If you cannot care for yourself, you receive a set amount of money you can use to pay for someone to assist you.

You can use this benefit for home services, adult daycare at a facility, assisted living facilities, nursing homes, and Alzheimer’s care centers. 

You can pay for hospice care, and something called respite care, which is time off for the caregiver. Long-term care insurance may also cover a skilled nurse or physical therapist. 

Some policies cover personnel for making meals and housekeeping.

 

Can’t I wait to buy it when I need it?

Here’s the catch: if you wait until you need long-term care insurance, you won’t qualify. This kind of insurance isn’t available to those who are already receiving long-term care. It can even be difficult to buy long-term care insurance if you are in poor health. Buy it when you are younger and in good health, and you will get a lower premium.

 

What is the cost?

Premiums can range from $1,700 to $3,500 per month for someone who is 55, but it can cost much more if you buy later in life.  

  • Your actual cost is dependent on:
  • Your age when you buy the policy (buying younger is cheaper)
  • The daily amount you want to be paid each day
  • How many years you want the policy to pay
  • The maximum the policy will pay over your lifetime

You may also pay extra for features such as benefits that adjust with inflation, as well as a monthly cash payment option.

 

Under what circumstances will long-term care insurance pay?

Even if you have a long-term care policy, you have two hurdles to get over before you can start receiving benefits.

First, you must have a benefit trigger. This means you meet the criteria for long-term care. A company nurse or social worker will assess your condition. This person will look at your ability to perform daily living activities, or will assess cognitive limitations you may have. 

Second, you must get past the elimination period. You must choose a period of 30. 60 or 90 days as an elimination period when you buy your policy. This is the amount of time between the benefit trigger and actually receiving money. Of course, the shorter the waiting period, the higher your premium. You have to pay your costs during the waiting period. 

 

Bottom Line

It has been said that you never regret that your house didn’t burn down even though you paid for fire insurance. Long-term care insurance is much like that. It is one more way to help protect your family and yourself from calamities you hope never happen.

 

Kevin Johnston is a financial writer who writes about personal finance and investments, as well as financial management and planning. He has written for The New York Daily News, The New York Post, The San Francisco Chronicle and The Houston Chronicle.

 

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