Financial Well-Being | March 20, 2024
What exactly is long-term care insurance?
Long-term care insurancegenerally provides coverage for the costs of obtaining assistance with the activities of daily living, such as help with dressing, eating, bathing, getting in and out of a bed or chair, and using the bathroom.
In addition, this type of insurance can also cover people who have been diagnosed with a severe cognitive impairment, such as Alzheimer’s or dementia.The need for long-term care may also be due to a chronic illness or injury that requires extended rehabilitation and care.
How does long-term care insurance differ from traditional healthcare insurance?
Traditional health insurance typically covers what’s “restorative in nature—you go to the hospital and you get better,” says Christine McCullugh, president of LTC Solutions, Inc., a national brokerage and specialty enrollment firm that specializesexclusively in long-term care insurance as an employee benefit. In contrast to traditional health insurance, long-term care insurance usually includes “custodial care,” such as nursing care, and help with bathing, dressing, eating, transferring, toileting and managing medications.
These two insurance policy types are not exclusive of one another and it has generally been recommended that people have both to be well covered throughout their lives, she says. It’s also worth noting that Medicare does not typically cover the full, considerable costs of long-term custodial care, as many people mistakenly believe.
Who needs long-term care insurance?
According to a report prepared in connection with the U.S. Department of Health and Human Services, about 70% of Americans over age 65 will require long-term care services at some point. Individuals or families should consider long-term care insurance if they want to plan ahead for rising care costs.
“But we never want people to think it’s only for people over age 65,” McCullugh says. “Long-term care can affect people of all ages, if, for example, they’ve had a stroke or been in a car accident or developed early dementia.”
What is the right age to get it?
The right age to get long-term care insurance can vary depending on numerous factors, including your health status, family history, financial situation, and personal preferences. As with most insurance policies, it is likely wise to look into purchasing a policy when you’re in good health (which often means younger). If you wait until you are in your 60s or 70s to purchase coverage, you may have fewer options as some plans have enrollment age limits. You may also find that premiums are more expensive, or you may not qualify for coverage due to age-related health issues.
“The longer you wait, the more you’ll pay in premiums,” McCullugh says.
Is long-term care insurance tax-deductible?
Long-term care insurance (LTCI) premiums may be tax-deductible, but the amount that can be deducted depends on several factors. You should always consult with your CPA and your tax attorney before making any decisions.
How do I go about getting it?
Some employers offer long-term care insurance as an optional voluntary product. If an employer does not offer long-term care, some financial advisors as well as local insurance agents/brokers can often assist with obtaining a policy.
McCullugh advises talking to a licensed long-term care specialist in your state to help you sort through your options based on your health history and financial goals.
How much does a policy generally cost?
The cost of a long-term care insurance policy depends on your age, health, the amount and duration of coverage you choose, and the specific terms and benefits of the policy.
According to a survey by the American Association for Long-Term Care Insurance, in 2023 the average cost of a long-term care insurance policyfor a 65-year-old in good health was around $1,700 per year for men and $2,700 a year for women, with an initial policy benefit of $165,000.
“It really comes down to proper plan design,” McCullugh says. “It’s like buying a car—it does the same job, getting you from point A to point B, but it may have different luxuries.”
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