Long term care insurance (frequently abbreviated LTC) is designed to transfer the cost of someone who needs to live in some level of assisted care for a long period of time.
With people living to much older ages, long term care is becoming more necessary. This is especially true for someone wanting to leave an inheritance for their children and not completely deplete their nest egg on health care.
This LTC insurance guide will help you understand how the policies work and getting the right coverage for your needs.
What is Long-Term Care Insurance?
LTC insurance is designed to cover your care costs if you have a chronic condition or disability. If you have Alzheimer’s Disease, for example, you will need full-time care. LTC insurance has that covered.
The idea is to make provisions for when you are unable to take care of yourself. The standard criteria for a claim is the inability to perform at least two basic activities related to daily living by yourself. These activities are:
- Going to the toilet
- Getting in and out of bed
- Taking care of incontinence
You’ll take out the policy, pay the premiums, and, when the time comes, apply for the company to pay the benefits. This normally entails providing your medical records and submitting a plan of care. The company may require an evaluation by a nurse to finalize the claim. They also need to review your plan of care and approve of it before it can be put into action.
With many policies of this nature, there will be an elimination period that applies. This means that you’ll need to pay for care yourself for a while. This could be anything from 30 to 90 days. If you still need care after this, it will kick in.
These policies will have limits in terms of day-to-day benefits and an overall maximum over your lifetime. If you are married, you can often opt for an option known as shared care. Essentially this means that one spouse may access the other’s benefits if their own have been exhausted.
What Does LTC Insurance Cover?
Most companies cover a range of different options including:
- Your own home: If you can continue living in your home, and just need some assistance, a day/night nurse can be brought
- An assisted living center: This is where you move out of your home into a facility. You’ll have your own room and stuff, but will be assisted with daily living activities.
- A daycare facility for adults: This is usually a short-term care facility. You might book in a while recovering from an operation or just for support.
- Hospice care: If you have a terminal illness, hospice care can make your last days more comfortable.
- Respite care: Maybe one of your children takes care of you full-time. From time to time, they’ll need a break, or need to be away from home. Respite care fills in the gaps.
- A nursing home: If you are no longer able to care for yourself and need full-time care, a nursing home may be the right option.
LTC coverage will pay for the fees for facilities or a home nurse. It will also stretch to physical and occupational therapy. If you need to have your home made more accessible due to your condition, the coverage might apply for that as well.
How to Lower Costs
These policies are clearly important, but the rates can be high. There are a lot of things that the company takes into account when determining premiums. These include:
- How old and healthy you are when you get the policy: This is important, because the younger and healthier you are, the longer it should be before you claim. Like most health-based policies, you’ll lose points for bad habits like smoking or being overweight.
- How much it will pay on a daily basis: Some policies will pay a flat rate, others will pay different rates for different services. A flat rate is uncomplicated, but what if you need more specialized care? It’s best to consider the choice carefully here.
- How long it will pay out for: If you take this figure and multiply it by the maximum amount paid per day, you’ll have an idea of how much the policy is worth. Most benefits will be paid out over two and five years. After this, you’re on your own.
- The elimination period: This is the amount of time that you’ve had to been cared for before your benefits kick in. In some cases, the company will pay from day one. In others, you’ll have to wait ninety days. The latter is a lot less costly in terms of
- Inflation protection: This allows you to increase your benefits annually to help deal with inflationary increases. This is a good option – it will raise your premiums, but it does help protect you against increases in prices of care down the line.
The best way to keep your premium costs down is to get the policy earlier rather than later. Your premiums will be a lot more manageable if you start at fifty-five rather than sixty-five. According to industry experts, waiting until you’re sixty-five could mean paying at least a third more.
You can also opt to increase the elimination period. Having an elimination period of ninety days instead of zeroing it can save you as much as 40 percent on your premiums. You’ll have to take into account, though, that you’ll have to foot the bill for those ninety days, so you’ll need to save.
Lastly, you can see if your employer can negotiate a group rate for employees. This will often result in you getting a more affordable premium, and your employer may even subsidize the premiums themselves. The policy doesn’t fall away if you leave either – you can continue it as normal.
You can also save money by reducing the daily limits or the overall length of time that the policy pays out for. This might be a mistake, though. The chances are good that if you’re going into care, you’ll need it for the rest of your life. Cutting the coverage here might end up biting you in the butt later.
Getting Long term Care Insurance Quotes
The most important thing you can do with getting LTC quotes is to get them from multiple carriers.
You will also want to make sure that you are comparing policies that are offering the same benefits. This means that the elimination period and daily limits are the same.
Top Companies for LTC Insurance
Long term care policies are available through many of the top insurance companies. Three of the best long term care carriers are:
Northwestern Mutual – Offering some of the best standard benefits, Northwestern Mutual LTC policies are some of the best in the country.
Mutual of Omaha – With some of the best financial ratings of any insurance company, Mutual of Omaha LTC policies are a solid choice.
TransAmerica – Covering a larger age range than just about anyone. TransAmerica LTC policies offer competitive rates.
Long Term Care Insurance Guide Bottom Line
LTC policies are not cheap, but there is a very good chance that you’re going to need to cash in the benefits at some time. As you age, it is nice to have the peace of mind that, no matter what happens to you, you can afford to have a proper level of care.