5 Tips for Long-Term Care Insurance

Let’s start with some good news: Americans are living longer. But that comes with bad news: We’re getting sicker, too, so our increased longevity means more and more of us will require long-term care. In fact, research from the Centers for Medicare & Medicaid Services reveals that at least 70 percent of people 65 or older will need long-term care at some point in their lives. The duration and demands of the care required often exceed what family and friends can provide — or what many of us can afford with our own savings.

Dalih Suchet, a 15-year long-term care insurance specialist with Whitehall Benefits of Nashville, says:

“Those you love would likely drop everything to take care of you. But trying to have conversations and make decisions in the midst of crisis is difficult and can lead to poor decisions. Having a plan and talking it through with your loved ones in advance can help your family members ensure that your intentions are achieved. It can also ease the emotional, physical and financial toll of caregiving on your family members

That’s where long-term care insurance steps in. Health insurance doesn’t pay for extended, nonmedical care at home or in an assisted-living facility or nursing home. Neither does Medicare. And while Medicaid does offer help, most recipients must first exhaust most of their assets in order to qualify. These costs can be staggering. According to the insurer Genworth, the median rate for a private nursing home room in Tennessee is $198 a day or $72,088 a year. For an in-home health aide, it’s $18 an hour. In addition, do not forget the medical expenses not covered by health insurance.

1. Calculate how much coverage you’ll need.

The average policy covers $149 of expenses daily. To determine how much coverage you’ll require, call an in-home aide service, nursing home or assisted-living facility that you might like to use one day and ask them their per-day cost. Factor inflation into your calculation because the cost of health care continues to climb. According to CPI, healthcare inflation is currently about 2.5 percent, but the long-term average is closer to 6 percent. Next, consider how long your coverage should last. Only about 20 percent of people stay in a nursing home more than five years, so that’s a good minimum time frame. If long-term care insurance is not in place, paying for care will quickly drain income and/or assets.

Know if your benefit payout is daily or monthly, Whitehall Benefits’ Suchet says.

Daily benefit means there’s a specific reimbursement dollar limit for each day’s expense; with the monthly, your expenses are totaled for the entire month against your limit. This can really affect your out-of-pocket expense, especially if your daily expenses fluctuate for home care, according to Suchet.

2. Consider some additional features.

Consider applying the savings on a shorter coverage period to other policy features: a shorter waiting period (the standard 90-day waiting period lowers your premium but could cost you thousands out-of-pocket while you wait for your coverage to kick in), a home-care benefit (many policies today pay out 100 cents on the dollar for care at home, but some do not) and compound-inflation protection (3 to 5 percent extra each year gives you a better shot at keeping abreast of rising health care costs). If you can afford more, increase the amount and time period of your benefit in addition to these features. Finally, if you’re married, be sure to explore options for sharing benefits.

Be careful that you understand how your waiting period is defined, Suchet says. If it’s defined as 90 days of service and you’re receiving help only a day here and a day there, it could take many months to qualify for benefits.

3. Age and health matter — a lot.

Premiums are based on your health status and age. So, generally speaking, the younger you are when buying a policy, the healthier you are and therefore the more likely you are to qualify and get a lower premium. People with serious chronic conditions may face high premiums or even find that they’re uninsurable. The cost of long-term care insurance varies widely from person to person, policy to policy and state to state. But as a rule of thumb, someone in his or her late 40s or early 50s will pay around $2,000 to $6,000 annually for a good policy. Someone in his or her 60s would pay about the same but for less coverage. Your early to mid-50s is the time to begin thinking seriously about insurance, many experts say.

Also, keep in mind the industry is trending toward females paying more for coverage because of higher claims experience, although there are a few companies left that still have sex-neutral rates.

4. The provider and physician determine when your benefits begin.

Policies begin paying out once you’ve met a level of need defined by most providers, in conjunction with your physician, as the need for substantial assistance with two “activities of daily living”: bathing, eating, dressing, toileting, transferring from bed to chair. Another trigger for a benefit being paid is dementia.

5. Find a good agent and a reputable insurance provider.

Long-term care is a complicated issue, so guidance from an experienced agent is critical. Jesse Slome, the executive director of the American Association for Long-Term Care Insurance, recommends your agent have at least three years’ experience selling long-term care insurance, have sold at least 100 policies and work with at least three or four insurance companies so that you get a good, cost-effective policy — and not just one that garners the agent the highest commission. Be sure to check on the insurance company’s financial and claims paying ability ratings as well as its track record for rate stability.

Finally, Suchet suggests, having a plan can help ensure you and your family are able to provide for each other better and longer. Having the conversations and sharing your thoughts means that you can face your future with confidence.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.