Long-Term Care Insurance
Background
Did you know that Medicare typically doesn’t cover nursing home stays or in-home health services? Also, according to AARP, by the time you reach 65, chances are about 50-50 that you’ll require paid long-term care (LTC) someday. Long-term care insurance can help protect against these expenses if you or your spouse can no longer perform daily living activities such as bathing, dressing, and eating on your own. For many people, long-term care insurance makes sense as a way to safeguard against the high potential costs of nursing homes, assisted living, and in-home health services.
What Can Long-Term Care Insurance Cover?
A long-term care insurance policy helps cover the costs of care when you have a chronic medical condition, a disability or a disorder such as Alzheimer’s disease. Many policies will reimburse you for care given in a variety of places, such as:
- Your home.
- A nursing home.
- An assisted living facility.
- An adult day care center.
“give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
Abraham Lincoln
Long-Term Care Insurance
As mentioned in the background section, Medicare typically doesn’t cover nursing home stays or in-home health services. There is also a 50% chance that after you turn 65, you will require paid long-term care. According to the Alzheimer’s Association, the estimated cost for end-of-life care in 2016 ranged between $217,820 and $341,651. Most health and disability insurances won’t cover long-term care, but long-term care insurance will. There are two primary types of LTC, Traditional, and Hybrid.
Traditional long-term care insurance ensures that no matter where you need care, you’ll have the money to cover at least a portion of the bill. A lengthy stay at a nursing home is less likely to drain your savings or wipe out your estate. Typically, you can include an inflation rider that increases your daily benefit over time. The policy is triggered when you can no longer perform two out of six activities of daily living such as dressing, bathing, eating, transferring to a wheelchair, etc., or suffer from severe cognitive impairment. Benefits start after a waiting period of 30–90 days.
The Hybrid Life option is a policy that combines life insurance with long-term care coverage. With a hybrid policy, you can access the death benefit—the money that your beneficiaries would receive in the event of your death—while you are still alive to pay for long-term care . And if you end up not needing care, your heirs get the full payout. Also, you do not run traditional policies’ risk of a rate hike, because you lock in your premium upfront. If you’re older or have health problems, you may be more likely to qualify for this than a tradition policy as well.