A Guide to Long-Term Care Insurance
- Long-term care insurance makes it easier to pay for high-quality care. Read on to learn more about long-term care insurance pros and cons for older adults.
Long-term care insurance is designed to pay for expenses not covered by Medicare, Medicaid or private insurers. LTC plans may pay for hospice care, skilled nursing, in-home assistance and other services that can help older adults maintain their independence and preserve their quality of life as they age. Like any other type of insurance coverage, long-term care insurance has advantages and disadvantages. Keep reading to learn more about the long-term care insurance pros and cons that are important to understand.
Is Long-Term Care Insurance Worth the Money?
To understand the advantages of purchasing a long-term care policy, it's important to understand the benefits of long-term care facilities. One of the main advantages is that long-term care facilities provide safe environments for older adults who need a little help with activities of daily living.
Residents of these facilities don't have to worry about cooking, cleaning or doing other chores, leaving them free to enjoy their free time. Another advantage of moving to a long-term care facility is that there's no need to worry about doing home maintenance or renovating a home to accommodate a disability.
The main disadvantage of long-term care facilities is their costs. Depending on the facility selected, Medicare and Medicaid may not pay for room and board or the services provided by trained staff members. Long-term care insurance helps cover these services even when another type of insurance doesn't, making it worth the expense for many older adults.
Advantages of Long-Term Care Insurance
The high cost of long-term care is what makes long-term care insurance so important for many older adults. One benefit of purchasing a long-term care policy is that beneficiaries get the peace of mind of knowing that their expenses will be covered should they need to move into a long-term care facility. Writing for the CFA Institute, Susan Hoover reports that 70% of adults who reach the age of 65 will need long-term care at some point in their lives. Purchasing long-term care coverage can help defray the costs of medical services and room and board.
When discussing long-term care insurance pros and cons, it's important to note that this type of policy can help older adults avoid financial emergencies. Covered individuals must pay a monthly premium, but that premium guarantees that their long-term care costs will be covered in the future. With so many older adults struggling to save money, buying long-term care insurance can help covered individuals avoid having to pay thousands of dollars for care when the need arises.
Long-term care insurance is also ideal for older adults who've had other insurance policies canceled due to their age or medical status. Most long-term care policies come with guaranteed renewals, which means the insurer can't cancel the policy for any of the following reasons:
- Covered individual's age
- Changes in mental health
- Injuries or illnesses
Disadvantages of Long-Term Care Insurance
When considering long-term care insurance pros and cons, the monthly cost is the greatest disadvantage. According to financial expert Dave Ramsey, the annual premium for a 60-year-old man could be as much as $1,811 per year, or just under $151 per month. The older an applicant is, the higher his or her premium will be, making it important to apply for long-term care insurance at the right time.
What is the best age to buy long-term care insurance?
Purchasing long-term care insurance at a younger age makes it possible to lock in a lower premium; however, buying too early increases the total cost of the coverage over the individual's lifetime. To limit the cost of LTC insurance as much as possible and ensure the coverage is in place when it's most likely to be needed, Dave Ramsey recommends purchasing a policy at around age 60. This applies to healthy individuals without family histories of serious illnesses developing at a young age. For older adults who worry that they could develop early dementia or another health problem before they turn 60, it's wise to buy long-term care coverage a little sooner.
Another disadvantage of long-term care insurance is that it can be difficult to qualify for coverage. Insurers typically deny applications from individuals with the following conditions:
- Dementia or memory loss
- Kidney failure
- Sickle cell anemia
- Systemic lupus erythematosus
- Advanced multiple sclerosis
- Parkinson's disease
- Muscular dystrophy
- Cystic fibrosis
- Alzheimer's disease
What disqualifies seniors from long-term care insurance?
Even older adults without any of the conditions mentioned above may be turned down for long-term care insurance. Coverage may be denied for older adults who meet the following criteria:
- Uses a wheelchair, a walker or supplemental oxygen
- Inability to perform certain activities of daily living without assistance
- Requires assistance with grocery shopping, banking and other basic activities
- Uses or needs care provided by a nursing home, adult day care, home health aide or assisted living facility
Long-Term Care Insurance Pros and Cons: The Bottom Line
Although long-term care insurance can be costly, and it can be difficult for some older adults to qualify, many applicants are likely to find that the advantages outweigh the disadvantages. This type of insurance makes it possible to plan ahead for long-term care expenses, giving older adults more control over their finances.