70%. That’s how many senior citizens are expected to need living assistance at some point in the future.
Yes, more than two-thirds.
And unless you’ve considered what goes into the cost of that aid, the sticker shock could throw you.
So how can you afford it?
If you plan ahead, one possibility is Long-Term Care Insurance (LTCi). But how do you plan ahead?
Here are some questions to get you moving.
What is Long-Term Care Insurance (LTCi)…and What Isn’t It?
(Hint: It’s “Taking Care of” Business)
Long-Term Care Insurance is just what it says: Insurance that pays when you need long-term care.
And what does needing long-term care mean?
Either you need continual supervision because of a severe cognitive (mental) disorder, or you’re chronically ill for at least ninety days, requiring help with two or more of the Six Activities of Daily Living:
- Transferring from your chair to bed or in and out of bed.
- Walking or moving around
This insurance is not going to cover your doctor bills or prescription drugs. It’s not Medicare, and it’s not Medicaid.
Instead, its goal is to help you stay in your home for as long as possible with home care and adult day care and then provides if you need to move into an assisted living facility, a nursing home, or Hospice.
The Takeaway: This isn’t medical insurance. It’s CARE insurance.
What Can Long-Term Care Insurance Cover?
(Hint: It’s Not Just Room and Board)
You might have three types of needs:
- Custodial care: help with those activities of daily living (eating, bathing, dressing,…) Your helpers don’t have to be medically trained professionally, but the care is supervised by a doctor.
- Intermediate care: periodic nursing and rehab provided by registered nurses, licensed practical nurses, or nurse’s aides—all supervised by a doctor.
- Skilled care: around-the-clock attention because of a medical condition. You’d be seeing skilled medical workers like registered nurses and professional therapists under a treatment plan set up by a doctor.
(Note the recurring factor? The doctor’s involved, at least at some level.)
Not all insurance policies cover all three types of needs, so you’ll want to ask the company what their limits are BEFORE you sign on that dotted line.
Other included offers to look for:
- a Care coordinator who first helps set up both plans and caregivers to fit your needs and then monitors your care. (It’s hard to always rely on your own research all the time.)
- Caregiver training by a medical professional who coaches an informal caregiver on your needs.
- Respite Care, providing substitutes for your care while your caregiver gets a much-needed break.
- Home modifications and equipment to make your home physically fit for your needs, keeping you safe.
- Bed reservation, paying to hold your bed or room for you if you need to leave the residence temporarily.
- Alternate care benefit for cost-effective alternatives to covered services in your plan.
- International care—just like what it sounds like. You’re outside the country and need qualified long-term care services. Benefits may be limited, but still available.
The Takeaway: There’s a lot that goes into long-term care. It’s helpful to have someone alongside to figure out what’s what.
When Should You Start Planning?
(Hint: A Day Late Leaves You More than a Dollar Short.)
While you want long-term care insurance for when you’re sick, you need to apply when you’re healthy.
In other words, if you wait till you need it, you can’t get it.
- Sign up BEFORE you’re diagnosed with Parkinson’s, Alzheimer’s, Multiple Sclerosis, uncontrolled diabetes, high hypertension, stroke risks… or you need back surgeries.
- Balance—being sure-footed—is also a huge issue for long-term care insurance since many doctors consider falling the “single most serious threat” to seniors. Unfortunately, that means some companies won’t accept you if you’ve had a steroid shot in your knees in the last year or so. (All the more reason to keep your muscles, bones, and joints strong with easy exercises.)
If you’re struggling with a medical issue, don’t assume the insurance will deny you right away. But don’t wait till it gets worse, either.
The Takeaway: That pre-existing condition could get you turned down. So apply before it exists.
Is There Such a Thing as Too Early?
(Hint: Here’s the Perfect Example of Time is Money)
Okay, this isn’t the kind of thing you need to sign up for at birth.
But registering much earlier than you’d think could save you a lot of cash.
Some long-term care insurance companies offer an extra-special benefit called a “10-Pay Policy” for applying before you turn 55.
- Your monthly premiums will probably be lower, and
- You only pay ten years of monthly premiums.
- After the ten years are up, you qualify for the full policy without paying anything more.
The later you sign up? They estimate a 3-4% increase in insurance premiums every year that you wait to register.
And you’ll keep paying premiums till the day you need to use your benefits.
The Takeaway: While assisted living may seem ages away, be that early bird. The worms are probably cheaper.
What Will You Need to Decide for the Policy?
(Hint: This Will Probably Require a Field Trip.)
Insurance agents will ask you four questions to determine your basic benefits:
1. How many months of care do you want the insurance to cover? (They usually want increments of twelve, like 24, 36, 48, 60, … up to about 96 months [8 years])
- The average person requires about 3 ½ years of care.
2. How much money per month do you want available? (Generally they’re talking jumps of a thousand between $2,000-$10,000.)
This is where that field trip comes in. Or at least some web-browsing.
- Visit local home-care companies, adult day cares, and assisted living facilities to see what type of place is important to you.
- Ask for general quotes on what they currently cost.
- We live in a pretty mobile society. So compare prices in other states that you might consider moving to in the future. (Wisconsin’s base price for a community-based facility averages around $4,500/month. Of course, prices vary from city to city.)
While you try to calculate what you’ll need down the road, there’s some good news. For most policies, you won’t have to spend the full amount each month. Leftovers can rollover, extending the number of months the policy covers.
In other words,
- if you’ve chosen a $6000/month policy for 24 months—but you only need $4000 worth of care/month—then your leftover $2000 can be banked for an extra 12 months of service.
- However, you can’t overdraw, taking $8000/month, even if you’re willing to reduce the time to 18 months. (Nice try, though.)
3. What kind of inflation rate do you want to plan for?
Of course, there’s no way prices will stay the same for the next twenty years. (If only, huh?)
- Common policy choices are 1%, 2%, 3%, and 5%, or none at all.
- Be sure to ask the insurance agent if the company offers a simple or compound increase.
4. How much of a deductible do you want before the policy kicks in? (Long-term care insurance companies call it an “elimination period” instead of deductible, but it’s basically the same idea.)
This is the amount of time you’ll pay for help before you can draw from your insurance benefits.
- Generally, you’ll choose between 1-3 months to pay on your own.
- For some companies it’s a one-time elimination period. For others, if there’s a break in aid, (i.e. you get better and then need help again), you pay the elimination each time you start receiving care.
Freaking out a bit? It’s not as bad as it seems. Depending on the situation, sometimes Medicare covers the first ninety days of care for rehab and skilled nursing help after a hospital stay.
That might take care of your whole elimination period.
You’ve Decided the Basics:
- your maximum amount of money per month (some companies do it by days),
- how many months of care you want,
- your inflation rate,
- and your elimination period.
The Takeaway: Deciding how much you’ll need for care each month and how many months you’ll need it might feel like you’re guessing future winning lottery numbers for the next twenty years. But it’s really just choosing where you want to spend your senior years and who you want helping you.
(Hint: That 70% Is Staring Us in the Face.)
Again, more than two-thirds! The number of senior citizens who will one day need assistance in daily living. The good news is many won’t actually need help till they reach eighty-five.
But if you wait that long to make plans, you might be up that creek wondering why you didn’t bring your paddle.
The Takeaway: Health insurance won’t cover this stuff. If you don’t have long-term care insurance, and you need long-term care, you’ll need a different way to pay. Will you be ready?
And Then There’s Part 2
There’s a lot more to talk about when it comes to Long Term Life Insurance—Like how to know if you’re dealing with a reputable company.
I can’t thank Scott P. Herrmann, FIC (Certified Kingdom Advisor with Thrivent Financial in Wisconsin), and John Weber, CFP, CFA (Jacobian Wealth Advisory in Illinois) enough for their time and help in explaining all the long-term care insurance nitty-gritty.
Any mistakes in representing the material are entirely my own. I know they’d be happy to sit down with you and discuss any financial needs you have.
Elizabeth Daghfal is a writer, teacher, speaker, and community volunteer. When she isn't teaching or writing-- Who are we kidding? Her husband and five kids say she's ALWAYS teaching and writing. She has a passion to help people who are struggling and is happy to say her shoulders are drip-dry. Born and raised in the South, she now lives in Wisconsin and loves it--except for the fifteen months of winter. Read more about her at elizabethdaghfal.com.