How Much Does Long-Term Care Insurance Cost?

long-term care can help you or a loved one live comfortably well into their Golden Years

The cost of long-term care insurance is not cheap. A 55-year-old man in the United States can expect to pay a long-term care insurance premium of $1,700 per year on average, according to a 2020 price index survey of leading insurers conducted by the American Association for Long-Term Care Insurance (AALTCI). That will cover $164,000 in benefits when the policyholder takes out the insurance and $386,500 at age 85, assuming benefits are increased 3% per year.

However, long-term care insurance costs vary widely, depending on factors like your age, health condition and the specific policies of your insurance carrier such as an inflation rider. That’s why it’s important to shop around to find the best rates and terms. You should also speak with a financial advisor who can help you plan the future.

How Much Does Long-Term Care Insurance Cost?

The AALTC provides the following estimates of annual premiums based on its 2020 study of different long-term care insurance carriers.

Annual Premium Estimates Status Age Premium Single Male 55 $1,700 Single Female 55 $2,675 Couple 55 $3,050 (Combined cost)

Keep in mind, though, that these are only averages based on a pool of data gathered from leading insurance carriers. The costs of long-term care insurance can vary widely,  depending on several key factors. We explore some of these below.

Health: Some medical conditions will disqualify you from even being able to purchase a policy, including muscular dystrophy, cystic fibrosis and dementia. That’s because insurers will likely lose money on those policies. Generally, the healthier you are, the less likely you’ll ever need to file a claim – and so the lower your premium.

Age: In general, you’ll pay more in long-term care insurance if you take out a policy when you’re older, since you’re probably less healthy and you’re closer to needing the assistance the policy covers. This is why the AALTCI recommends you begin shopping for long-term care insurance between the ages of 52 of 64.

Marital status: When combined, premiums tend to be lower for married couples than they would be for individuals paying for a personal policy.

Gender: Because women tend to live longer than men and make claims more frequently than their male counter parts, women tend to pay more for insurance premiums. The AALTCI study showed that a single female pays an annual premium of $2,675 on average while the single man that age paid $1,700.

Carrier policies: Each insurance carrier sets its own rates and underwriting standards. In fact, costs for the same services can vary widely from one company to another. This is why you should gather quotes from various carriers. You can also work with an experienced long-term care insurance agent who can gather these for you and help you understand the differences between insurance policies. They can also help you determine the kind of coverage you’re likely to need, so you don’t over-insure.

Should I Get Long-Term Care Insurance?

Long-term care costs can climb high, so you'd want to start saving now.

The average 65-year-old today has a 70% chance of needing some kind of long-term care eventually, according to the Urban Institute and the U.S. Department of Health and Human Services. Of those who need it, most would use it for about two years, but around 20% would require it for more than five years.

The smart money, then, would prepare for this significant cost. To give you a sense of how much bills can run, below are the estimated annual costs of different types of long-term care services, according to Genworth Financial, which has been tracking them since 2004.

Estimated Annual Costs Type of Services Price Private room nursing home $105,852 Assisted living facility $51,600 Home care aide $54,912 Home care homemaker $53,772

What’s more, costs have been rising faster than even inflation. Genworth found that the average cost of home-care services increased about $980 annually each year between 2004 and 2020. The average cost for a private room in a nursing home jumped by about $2,542 each year during the same time period, currently putting the average cost of a private room in a nursing home at $105,850 per year. As noted before, about 20% of Americans will require more than five years of care.

Unfortunately, with these costs, many retirement nest eggs will come up short. And contrary to popular belief, Medicare covers only limited medical costs, e.g., brief nursing home stays and narrow amounts of skilled nursing or rehabilitation services. The scope for Medicaid is even smaller. On average, it covers about 22 days of home care services if you meet very low income thresholds.

Of course, there’s no way of knowing how much long-term care coverage you’ll need. But knowing what long-term care insurance does and doesn’t cover is key to making sure you’re not over- or under-protected.

What Does Long-Term Care Insurance Cover?

Long-term health insurance typically covers services not provided for by regular health insurance. This can include assistance with completing daily tasks like eating, bathing and moving around. In the industry, these are known as activities of daily living (ADLs). Long-term care insurance policies generally would reimburse you for these services in such locations as:

  • Your home
  • Adult day care center
  • Assisted living facility
  • Nursing home

Some policies also cover care related to chronic medical conditions such as Alzheimer’s disease and other cognitive disorders.

But keep in mind that these are generalizations. There is no industry standard that sets ADL requirements for claim eligibility or what kinds of illnesses long-term care insurance will cover. Each insurance carrier makes its own rules.

So it’s essential to understand when coverage kicks in – and for how long. Policies used to provide coverage for life, but now most cap benefits at one to five years. If possible, some experts recommend extending the initial period when you are not compensated for costs (it’s often 90 days) in exchange for a longer period on the other end of receiving benefits. You also will want to know how premiums may increase over time and whether the cap on benefits will, too. Some carriers allow you to place an inflation rider that increases your daily benefit every year. That increase can be up to 3%.

How Does Long-Term Care Insurance Work?

After you apply for long-term care insurance, the insurer may request your medical records and ask you some questions about your health. You can choose the type of coverage you want, but the insurer must approve you.

When the company issues you a policy, you begin paying premiums every year. Once you qualify for benefits, which is often defined by not being able to perform a set number of ADLs, and the required waiting period has passed, you can file a claim. The insurance company then reviews your submitted medical records and may send a nurse to perform an evaluation before approving a payout. Once approved, you will be reimbursed for paid services, up to the cap on your policy.

Ideally, you’ll stay healthy and your long-term care needs will be minimal. Though your premiums will add up over time, this is one situation where you hope not to get your money’s worth. On the bright side, to lessen the hit to your wallet, the government may give you a tax break.

Tax Relief for Long-Term Care Premiums

If you don't lock in your long term care insurance cost when you are relatively healthy, it will only rise as you age and your health declines.

Some or all of the long-term care premiums you pay may be tax deductible at the federal and state level. But you must make these payments toward a tax-qualified insurance policy. Also, you must meet certain income thresholds.

Maximum Deductible Premium

Age Maximum Deduction 40 or under $420 41 to 50 $790 51 to 60 $1,580 61 to 70 $4,220 71 and over $5,220 How to Buy Long-Term Care Insurance

You can purchase long-term care insurance directly from carriers or through a sales agent. The agent can help you shop around for comparable rates. This professional can also help you understand how different policies work and what they offer.

Also, you may be able to get long-term care insurance through your employer. Some allow you to purchase policies at discounted group rates. However, you should get quotes from multiple insurance companies. In some cases, you may find better rates for more suitable policies that aren’t through your employer.

How to Calculate Your Long-Term Care Insurance Costs

Some websites such as Genworth Financial provide interactive calculators that can estimate what long-term care premiums may be like in your area. Prices and policies can vary, depending on the state.

Tips on Paying for Long-Term Care 

  • If you have a health savings account (HSA), you may want to start socking away more money in it for long-term care. Also called health IRAs, these plans allow your money to grow tax deferred. (But you have to have a high-deductible health plan to open an HSA). To find out more, check out our report on the best HSAs.
  • Don’t go it alone. A financial advisor can help you devise an insurance plan and figure out how you’re going to pay for it. If you are in the market to buy insurance now, some advisors are also licensed insurance agents. Use our matching tool to find the right advisor for you.

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The post How Much Does Long-Term Care Insurance Cost? appeared first on SmartAsset Blog.

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Choosing a Health Plan

In a lot of cases, our health insurance coverage comes from a group plan that is offered to you by your employer or by your spouse’s employer. For individuals who do not have insurance through their employer, individual policies exist as an option as well. 

Of course, you can also opt for having no coverage at all, but in the case of an emergency, this could be detrimental to your financial health. No matter your age or marital status, it’s worth looking into your options for a good health care plan to protect yourself from a medically-induced financial struggle. 

No matter what kind of plan you choose, there will always be some out-of-pocket expenses, which means you’ll have some decisions to make. Deciding what type of healthcare plan to choose can be stressful, but it doesn’t have to be overwhelming. In the sections below, we will discuss the key factors that play into choosing the right health insurance plan. 

Types of health plans available 

There are a lot of different terms to learn when sorting through health insurance plans, and each of them come with their own set of distinctions. Before we discuss the difference between HMOs, PPOs, POS Plans and Indemnity plans, it’s important to start with the most common types of health insurance categories: 

  • Indemnity of Fee-for-Service Plans: Health insurance plans that enable you to go to any doctor or specialist that you want without a referral are called indemnity, fee-for-service, or point of service (POS) plans. The insurance company will cover a predetermined amount of your medical expenses, and you will be responsible for the remaining balance. These plans tend to be the most flexible since there are no set restrictions on the medical providers you’re allowed to use, and you are usually not required to choose a primary care physician. 
  • Health Maintenance Organizations (HMOs): A Health Maintenance Organization (HMO) is a band of healthcare professionals and medical facilities that offer a set package of medical services at a fixed rate. This plan does require that you have a primary care physician (PCP), who would serve as the middle-man when it comes to health care. Your primary care physician would then decide whether or not seeking out a specialist is necessary. If your PCP finds it necessary for you to see a specialist, they will then issue you an in-network referral. 
  • Preferred Provider Organizations (PPOs): A Preferred Provider Organization (PPO) has the same organized care characteristic that you will get from an HMO, but with the benefit of more flexible options. A PPO allows you to seek healthcare outside of your network if you feel the need to. Keep in mind that doing so will usually cost you more in out-of-pocket expenses, but a PPO would still cover some of the cost, unlike an HMO. If having a wider variety of options is important to you, then a PPO might be a good option for you. 

Pros and cons of each health plan

Each type of plan comes with their own implications. Ultimately, you’ll have to figure out what is most important to you in order to make your decision. Let’s compare the pros and cons of each plan.

Indemnity Plans

Pros: The major advantage of this type of plan is that you are able to choose where you get your medical care from and which doctor to go to, without the need for a referral or a pre-approval. 

Cons: Indemnity plans will usually come with much higher premiums and deductibles, making them more expensive than perhaps an HMO or PPO. Another area where these plans fall short is the route you may have to take to get coverage. You may have to pay for your medical services out of your own pocket, and subsequently submit a claim to get reimbursed by your insurance company. There’s no telling how long this could take, and you also face the risk of not getting reimbursed at all. 

Health Maintenance Organizations (HMOs) 

Pros: The best thing about getting an HMO insurance plan is that your out-of-pocket medical expenses are usually pretty affordable, and you can expect to pay the same amount for each visit, depending on whether it’s a primary care physician or a specialist.

Cons: In most cases, any services that you receive from a medical professional outside of your healthcare network will not be covered with an HMO plan. Another drawback is that you have to get referred by your primary care physician in order to see a specialist. This may not be seen as a disadvantage to some, but for others it could be seen as an unnecessary extra step in the process if you already know what you need. 

Preferred Provider Organizations (PPO)

Pros: This type of plan offers customers much more flexibility than they would have with an HMO with a lot lower rates than one might experience through an indemnity plan. 

Cons: The main drawback with a PPO is that the out-of-pocket costs are generally less predictable.

Choosing a Health Plan is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

What Long-Term Care Insurance Covers

what does long term care insurance cover
While Medicare and Medicaid both help aging adults afford some of their medical expenses, they may not cover the cost of an extended illness or disability. That’s where long-term care insurance comes into play. Long-term care insurance helps policyholders pay for their long-term care needs such as nursing home care. We’ll explain what long-term care insurance covers and whether or not such coverage is something you or your loved ones should consider.

Long-Term Care Insurance Explained

Long-term care insurance helps individuals pay for a variety of services. Most of these services do not include medical care. Coverage may include the cost of staying in a nursing home or assisted living facility, adult day care or in-home care. This includes nursing care, physical, occupational or speech therapy and help with day to day activities.

A long-term care insurance policy pays for the cost of care due to a chronic illness, a disability, or injury. It also provides an individual with the assistance they may require as a result of the general effects of aging. Primarily, though, long-term care insurance is designed to help pay for the costs of custodial and personal care, versus strictly medical care.

When You Should Consider Long-Term Care Insurance

During the financial planning process, it’s important to consider long-term care costs. This is important if you are close to retirement age. Unfortunately, if you wait too long to purchase coverage, it may be too late. Many applicants may not qualify if they already have a chronic illness or disability.

According to the U.S. Department of Health and Human Services, an adult turning 65 has a 70% chance of needing some form of long-term care. While only one-third of retirees may never need long-term care coverage, 20% may need it for five years or longer. With a private nursing home room averaging about $7,698 per month, long-term care could end up being a huge financial burden for you and your family.

Most health insurance policies won’t cover long-term care costs. Additionally, if you’re counting on Medicare to assist you with these extra expenses, you may be out of luck. Medicare doesn’t cover long-term care or custodial care. Most nursing homes classify under the custodial care category. This classification of care includes the supervision of your daily tasks.

So, if you don’t have long-term care insurance, you’re on the hook for these expenses. However, it’s possible to get help through Medicaid for low income families. But keep in mind, you may only receive coverage after you deplete your life savings. Just know that Medicare may cover short-term nursing care or hospice care, but little of the long-term care in between.

What Does Long Term Care Insurance Cover

what does long term care insurance coverSo what does long term care insurance cover, Well, since the majority of long-term care policies are comprehensive policies, they may cover at-home care, adult day care, assisted living facilities (resident care or alternative care), and nursing home care. At home, long-term care may cover the cost of professional nursing care, occupational therapy, or rehabilitation. This may also include assistance with daily tasks, including bathing or brushing teeth.

Additionally, long-term care coverage can cover short-term hospice care for individuals who are terminally ill. The objective of hospice care is to help with pain management and provide emotional and physical support for all parties involved. Most policies allow beneficiaries to obtain care at a hospice facility, nursing home, or in the comfort of their own home. However, most hospice care is not considered long-term care and may receive coverage through Medicare.

Also, long-term care insurance can help cover the costs of respite care or temporary care. These policy extensions provide time off to those who care for an individual on a regular basis. Usually, respite care provides compensation to caregivers for 14 to 21 days a year. This care can take place at a nursing home, adult daytime care facility, or at home

What Long-Term Care Doesn’t Cover

If you have a pre-existing medical condition, you may not be eligible for long-term care during the exclusion period. The exclusion period can last for several months after your initial purchase of the policy. Also, if a family member provides in-home care, your policy may not pay them for their services.

Keep in mind, long-term care coverage won’t cover medical care costs. Many of your medical costs will fall under your coverage plan if you’re eligible for Medicare.

Long-Term Care Insurance Costs

Some of the following factors may affect the cost of your long-term care policy:

  • The age of the policyholder.
  • The maximum amount the policy will pay per year.
  • The maximum number of days the policy will pay.
  • The lifetime maximum amount that the policy will pay
  • Any additional options or benefits you choose.

If you’re in poor health or you’re currently receiving long-term care, you may not qualify for a plan. However, it’s possible to qualify for a limited amount of coverage with a higher premium rate. Some group policies don’t even require underwriting.

According to the American Association for Long-Term Care Insurance (AALTCI), a couple in their mid-50s can purchase a new long-term care policy for around $3,000 a year. The combined benefit of this plan would be roughly $770,000. Keep in mind, some policies limit your payout period. These payout limitations may be two to five years, while other policies may offer a lifetime benefit. This is an important consideration when finding the right policy.

Bottom Line

what does long term care insurance coverWhile it’s highly likely that you may need some form of long-term care, it’s wise to consider how you will pay for this additional cost as you age. While a long-term care policy is a viable option, there are alternatives you can consider.

One viable choice would be to boost your retirement savings to help compensate for long-term care costs. Ultimately, it comes down to what level of risk you’re comfortable with and how well a long-term care policy fits into your bigger financial picture.

Retirement Tips

  • If you’re unsure what long-term care might mean to your retirement plans, consider consulting a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • The looming costs of long-term care may have you thinking about how much money you’ll need for retirement. If you aren’t sure how much your 401(k) or Social Security will factor into the equation, SmartAsset’s retirement guide can help you sort out the details.

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Questions to Ask When Shopping for Health Insurance

Whether you are acquiring it through your employer or on your own, shopping for health insurance coverage is a task that many adults will be faced with at some point. Health coverage is not a one-size-fits all amenity, and it comes in many forms such as Point of Service (POS), Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs) and more. 

Buying health insurance is a big commitment, so do the research and look over all your options before making any hasty decisions. Technical information about different health insurance policies can be overwhelming, which is why seeking the help of a licensed insurance agent or a health insurance broker might be your best bet. In the following sections we will discuss ways you can prepare to meet with a health insurance agent as well as what questions to ask. 

How to prepare to meet with a health insurance agent 

Health insurance exists to protect us financially when we get sick or injured, which is why it’s so important for you to look at plans that fit the unique needs of you and your family. Whether you are an employer shopping for insurance plans for your employees, or just an individual browsing your options, choosing a caring agent who takes their job seriously is key to finding the right plan. To start, you will want to work with an insurance agent who is experienced, knowledgeable and trustworthy.

Finding the right agent to work with isn’t the only important piece of the puzzle, you’ll also want to do your part as well. Coming prepared to the appointment will help things run more smoothly and will ensure that you to ask the right questions. 

Before meeting with the insurance agent, make sure that you:

  • Know how much you are willing to pay: Before your appointment with an insurance agency, you should consider how much risk you want to assume for yourself versus how much risk you want the insurance company to assume for you. In other words, would you rather make higher monthly insurance payments and have a lower deductible or would you rather pay a lower monthly insurance payment and have a higher deductible? If you’re okay with paying a hefty deductible during a medical crisis, then you might consider choosing a plan with a lower monthly payment. On the other hand, someone who needs more consistent medical care might opt for a plan with a lower deductible. 
  • Research the insurance agency that you will be doing business with: Ask friends and loved ones for feedback on the agencies they’ve worked with and find out how their experience was. If you are an employer, do some research to see what agencies other companies do business with. The important thing is that you choose an agency that you trust. 
  • Know what to bring with you: In order for the agent to help you the best they can, they will need to know as much information as possible about yours and your family’s medical history. The agent will want to know about any of yours or your family’s medical conditions and personal habits such as drinking, smoking, diet, etc. Call in advance and find out exactly what you need to bring. Be truthful and thorough so that your agent can find the best health insurance policy for you. 
  • Make a list of the questions that you will want to ask: It’s easy to get overwhelmed during these appointments. Writing down your questions will not only help you to be more organized, but it will also lower your chances of forgetting to bring up important topics.  

Questions to ask your health insurance agents

Before meeting with a licensed insurance agent, you should write down a list of questions that you want to have answered during your appointment. Here are some questions you should be asking your agent about your insurance before buying:

    • How much will it cost? This is probably the most dreaded part of the conversation, but it has to be discussed! The overall cost of your health insurance policy will depend on your premium, deductible and out-of-pocket-max. When browsing through plans, you’ll want to take notes on how much these three items will cost up front, because each plan varies in rates.
      • Premium: Health insurance premiums are rates that you will pay every month in order to secure your coverage. The initial payment you receive will be a premium, and will continue monthly. 
      • Deductible: If your plan has a deductible of $2,000, then that means you will be responsible for paying the first $2,000 of health care before your plan begins covering certain costs. Once you pay your deductible, you’ll pay significantly less for your health care. 
  • Out-of-pocket max: This is basically the maximum amount of money that you will ever have to be responsible for paying while covered—as long as you stay in-network, that is. Let’s say your out-of-pocket max is $5,000, but you end up needing surgery that costs $30,000. You would only have to worry about paying $5,000. Additionally, if you’ve already reached your $2,000 deductible, then you would only have to pay $3,000. The purpose of an out-of-pocket max is to protect you from having to pay extremely expensive bills, but remember—the surgery would need to happen at a medical facility that is in-network.  
  • Is my current doctor covered? If you’re already receiving health care, you’ll want to know if your current doctor is a part of any prospective insurance company’s network of health providers. This information should be fairly simple to find out but could be an important factor in your decision. If you are currently taking any medications, you’ll also want to ask your agent to check the formulary to see if your prescriptions are covered.
  • Who do I contact when I have questions? It’s important to find out if your prospective health insurance company has a customer service team you can call or message when you need to inquire about bills, claims, copays or anything else insurance-related. Does the company have a separate phone number to call when you want help finding a health care provider? Is this customer service line automated or will you be speaking to an actual insurance representative? These questions are important to determine what kind of support is available long after you’ve signed a contract. 

What happens during an emergency? When going to see a doctor for a normal visit, you have time to plan and make sure that the doctor is in-network. However, during an emergency, we may not have the same luxury. It’s possible that in a case where you need dire medical attention, the closest health care provider may not be in-network. You should ask about your prospective company’s policy on emergencies and what the standard routine consists of.

Questions to Ask When Shopping for Health Insurance is a post from Pocket Your Dollars.

Source: pocketyourdollars.com