15 Things People Of All Ages Need To Know About Long-Term Care Insurance

Welcome to the fourth installment in a “How To Not Suck…” series on buying insurance. Previous posts looked at auto insurance, homeowner’s coverage, and life insurance, and next week we’ll look at disability plans.

No one wants to think they’ll be unable to take care of themselves, but it’s likely to happen eventually, with one study saying there’s a 70% chance you’ll need some kind of care after age 65. Today, we’re thinking to the future. Long-term care insurance will help pay the bills should you need some kind of care, so you had better learn How To Not Suck… At Long-Term Care Insurance.

And this kind of care isn’t just for older folks. You could be in an accident or have an debilitating illness and need help. In fact, 40% of those who receive long-term care are under 65.

And we’re not talking about a long weekend. The average need for care is 1,040 days, according to the American Association for Long-Term Care Insurance

So who pays for the cost of care?

You will, unless you have long-term care insurance, or LTC insurance.

Here are 15 things you may not know — or that you need to know — about LTC insurance.

1. Medicare won’t cover the cost for most long-term care scenarios.
It will cover the kind of skilled short-term nursing care you might need after a hospitalization or an accident, but it won’t pay for permanent assistance. Medicaid will cover nursing home care, but only for those with limited assets, and you won’t have much say about what facility you’ll go to if Medicaid is paying the bills.

2. LTC insurance can be expensive, but paying outright for care is costlier.
The median cost for a home health aide for eight hours a day is $44,000 a year, and nursing home care in a private room averages $84,000 a year, according to a 2013 Genworth study. Some parts of the country are even more expensive. (Check this map to see the cost of care in your area.)

3. It’s not just nursing homes.
Lots of different kinds of care are covered by LTC policies. Each policy will spell out the details, but most will cover home health aides, assisted living, nursing homes and even adult day care..

4. You’re not too young.
Like life insurance, the younger you are, the cheaper the policy will cost. Maybe you don’t need a policy in your 20s and 30s, but start thinking about it when you’re in your 40s. If you wait too long, your health could change and make a policy more expensive, or you could even become uninsurable.

5. Your employer may offer LTC insurance at a less expensive group rate…
But many policies are not portable, meaning you can’t take them with you after you leave your job. If you want a group rate, check with your professional associations or alumni groups to see what’s offered.

(Apologies in advance for the insurance jargon in the next several items, but any policy you consider will be filled with terms you need to understand before you buy.)

6. Daily or Monthly Benefit Period:
This is the amount of money your policy will give per day or per month for care. Also know the lifetime cap on your policy.

7. Inflation Rider:
This will increase the cost of your policy, but it’s well worth it. An inflation rider means the benefit you receive will rise with the cost of living. Think about what care may cost in 20 or 30 years. Scary, indeed.

8. Elimination Period:
This is the amount of time that must pass before your policy pays on a claim. Ninety days is common (so you’d pay for care for 90 days before the policy kicks in) but taking a longer elimination period will lower the cost of your policy.

9. Shared Benefits Rider:
This is a product made for married couples. It allows you to share your benefits with your spouse. For example, if your spouse uses up all his benefits, he can dip into yours.

10. Paid Up Premiums:
If you have a fat wallet today, you can opt to pay higher premiums for a set time period, say, 10 years, and at the end of that time frame, the policy is paid up and you won’t owe anything more in your lifetime. This is also called an accelerated premium option.

11. Free-Look Period:
This is essentially a buyer’s remorse clause. If you decide you don’t like, don’t want, or regret the policy you purchased, you usually have 30 days to change your mind and get a full refund.

12. Non-forfeiture/Guaranteed Renewability:
The non-forfeiture provision will help you if the insurance company decides to increase the cost of your policy. You’ll be able to keep your policy in effect, but for a smaller benefit, rather than it be cancelled outright. A policy that’s deemed to have guaranteed renewability means the insurance company can’t increase your premiums unless all similar policies in your state get an increase. It can’t be cancelled, either.

13. Exclusions:
Because nothing in life is easy, some reasons for needing care may be excluded from your policy. Self-inflicted injuries, alcohol and drug abuse and some mental illnesses are generally excluded.

14. If you’re thinking about a policy, get your spouse on board.
You could save as much as 40 percent if you both opt for the insurance.

15. There are some tax incentives available to offset to cost of LTC policies.
There are partnerships between some states and private insurers, you may be able to deduct premiums as part of your medical expenses on federal returns and some states offer similar incentives.

Also make sure you work with an insurance company that will be around in 20 or 30 years when you may need to make a claim. Imagine paying all those years and getting nothing? Egads.

To learn more about the costs, check out the American Association for Long-Term Care Insurance.

Next week: Our insurance series wraps up with a look at the essentials of disability coverage.

Have a topic you’d like to see covered in How To Not Suck? Or maybe you’re an expert who would like to share your insight with Consumerist readers? Send us a note at notsuck@consumerist.com.

You can read Karin Price Mueller’s stories for The Star-Ledger at NJ.com, follow her on Facebook, and on Twitter @kpmueller.

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