Do I Need Long-Term Care Insurance?

Clifford PendellWritten by Clifford Pendell
group of seniors enjoying dinner

The U.S. Department of Health and Human Services (HHS) estimates that 70% of people over the age of 65 will need some form of long-term care during their lifetime.

Many will require support and services for several years, which can lead to high medical costs for family members. The 2021 average cost for a private room in a nursing facility, for example, was $9,033.75 per month or $108,405 per year.

Regardless of how gracefully you may be aging, the reality is that you will, at some point, need assistance with daily activities—whether from an in-home care provider, nursing home, or assisted living facility. This article provides an introduction to long-term care insurance (LTC), which many families purchase to mitigate their future long-term care costs.

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    What is Long-Term Care Insurance?

    Long-term care insurance is designed to cover the daily care needs of the elderly, also known as activities of daily living. Activities of daily living or “ADLs” are essential to independent living and include; bathing, grooming, dressing, eating, toileting, walking, etc.

    Since health insurance, Medicaid, and Medicare typically do not cover these costs, LTC insurance can prove extremely helpful, especially considering the following stats:

    • By 2050, the number of individuals using paid long-term care services in any setting will likely double from the 13 million using services in 2000 to 27 million. (HHS)
    • Roughly 30 percent of the older population with long-term care needs have three or more activities of daily living (ADLs) limitations and require substantial care. (Source: Kaiser Family Foundation)

    Long-term care insurance is not health insurance or a medicare supplement plan. A long term care policy pays for the estimated cost of your assisted living needs, preventing this responsibility from falling onto your loved ones.

    How Does Long-Term Care Insurance Work?

    The U.S. Department of Health and Human Services, or HHS, offers the following definition for long-term care insurance:

    “Long-term care insurance policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with activities of daily living. You can select a range of care options and benefits that allow you to get the services you need, where you need them.”

    Long-term care insurance can be purchased in one of two ways:

    At JRC Insurance Group, we are happy to assist you with finding LTC coverage via either route. Regardless of which option you choose, purchasing the coverage sooner rather than later will save money in the long run. As with any type of health or life insurance, premiums generally rise with each year you age, because the insurer is assuming a higher risk.
    It’s also important to note that if you are already receiving some form of long-term care, or if you are in poor health, you may not qualify for long-term care life insurance. This is why it is so advantageous to lock in your policy and rates when you are young and healthy.

    The Four Main Elements of a Long-Term Care Policy

    The HHS explains that the cost of long-term care insurance is determined by several factors. To keep things simple for you, we’ve divided the anatomy of a long-term care policy into four parts:

    1. Elimination Period

    An elimination period is the amount of time that must pass before your policy begins to pay out. Most LTC policies offer a waiting period of 30 to 180 days, and during this time, you are still responsible for your long-term care expenses.

    Purchasing a policy with a longer elimination period will save you money on your monthly premiums, but these savings will be negated while you wait for your coverage to begin. Most providers offer their most aggressive rates for policies with a 90-day elimination period.

    2. Term

    When you purchase LTC insurance, you'll also need to select the amount of years you want your policy to cover the cost of your care. Most policies offer 2 to 5 years of benefits, but this period can be adjusted to fit your budget. The longer your policy's coverage period is, the more expensive it will be.

    This is because the insurance company is putting themselves on the line to pay a larger sum. On average, women require 3.7 years of long term care living assistance while men have an average of 2.2 years.

    3. Daily Benefit Amount

    A LTC policy's daily benefit is the amount of money the policy will reimburse you each day for the cost of your long term care. This amount is determined by your when you purchase your policy

    While a long-term care policy with a lower daily benefit amount will be less expensive, its important to consider the average cost of LTC in your state before you decide on an amount. With the annual cost of a nursing care exceeding $100k, a daily benefit amount of $250 to $300 is usually recommended.

    Most LTC policies are sold in $50 increments and they offer daily benefit amounts ranging from $100 to $500. If you’re not sure how much coverage you need, or what your daily benefit should be, we can help. Toll-Free: 855-247-9555. 

    4. Inflation Protection

    LTC can come with various add-ons, the most notable being inflation protection. As the average cost of care continues to rise year after year, inflation protection can provide peace of mind in knowing your policy will hold the same value down the road—when it’s needed most—as it holds now.

    Most LTC insurance policies offer 3-5% compounded inflation protection; the higher inflation protection percentage you choose, the higher the cost of your policy. But again, the extra cost can be worth it to know that you’re covered.

    Standalone LTC vs. LTC Riders

    Long-term care life insurance can be purchased as a standalone policy or as an addition to life insurance policy, also known as a LTC rider. Choosing between a standalone LTC policy and life insurance with a long-term care rider can be difficult when you’re not sure of each policy’s cost, benefits, and limitations. That’s why we’re here to provide expert guidance.

    Depending on your unique financial and family situation, we can help you determine the most cost-effective product for your needs. For a complete guide to the different ways you can purchase a LTC policy, you can also visit our previous article on life insurance with a long-term care rider.

    Finding the Best Long-Term Care Insurance Rates

    When shopping for long-term care insurance, here are a few tips to keep in mind to find the best rates:

    • Buy While You’re Young

    Buying a LTC policy in your 40s or 50s could save you immensely compared to waiting until you’re in your 60s or later. Remember, the older you get, the higher the cost of any type of life insurance or long-term care coverage.

    Even if you’re paying for the policy sooner, you’ll be saving yourself from potentially astronomical costs later on. In addition, if your health declines as you get older, you won’t have to worry about being ineligible for a LTC policy.

    • Being Married Helps

    Are you married or do you live with your significant other? If so, you can expect favorable LTC rates–roughly 10-15% lower than single applicants. If you and your spouse or domestic partner apply for long-term care life insurance together, you can expect a discount of up to 35%.

    This is because the insurance company assumes that your spouse or partner will be able to provide some of the care needed in your latter years, delaying an influx of daily care costs with a provider or care facility.

    • Know Your Needs and Means

    If you don’t have a large savings set aside, it may be advantageous to select a policy with a shorter elimination period. Remember, though, you’re responsible for all of your long-term care costs until your policy’s elimination period has ended.

    If you’re more concerned with the monthly cost of your coverage and you have an ample amount of money set aside for your retirement, consider buying a policy with a longer elimination period.

    • Shop Multiple Providers

    The best practice when shopping for an LTC policy is to work with an independent agent who can shop the market on your behalf. Don’t just go for the first policy you see; different insurers cater to different types of applicants, and you might miss an opportunity to lower your cost with a lesser known but equally reputable company.

    Not sure where to begin? We can help.

    As an independent agency, JRC can retrieve quotes from various top-rated insurance companies in a matter of minutes. By having access to numerous companies and their underwriting guidelines, we’re able to match our clients with the most affordable options available.

    Our owner-operated agency is licensed to sell life and health insurance throughout the United States and there is no obligation or cost for summoning our services. We can also help you assess your overall needs to determine exactly what coverage you should buy—nothing more, nothing less.

    We’re here to save you money and provide you with the information you need to make an informed decision. Call us today, toll-free, at 855-247-9555. Our agents offer at least 10 years of experience and we work with more than 50 top-rated life insurance providers. 

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    Written by:

    Clifford Pendell

    Clifford Pendell

    Managing Partner and Co-founder

    Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.

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