Retirement Highlights
By Joel Zimmerman

Long Term Care Insurance and What You Need to Know about It

A large section of the population today is heading for retirement, which makes long term care planning imperative, considering the health and disability risks that come with old age. You may have already invested in a long term care (Long Term Care) plan or may be considering your options, but there are some important aspects to consider first.

Long Term Care Insurance – Is It Worth It?

In order to understand whether investing in an Long Term Care policy is right for you, you need to first understand how long term care insurance works. Long Term Care or Long Term Care Insurance plans are insurance policies that offer financial protection against the expenses associated with long term care services. Planning for long term care is a key element of financial planning, especially for retirement.

Policyholders receive benefits to help cover qualified costs if they ever need long term care, with a variety of additional options in terms of inflation riders, maximum benefits, etc. Typically, Long Term Care Insurance policies include a maximum daily payout amount, in addition to total payout, but the details depend upon the plan you invest in.

At What Age Should You Buy Long Term Care Insurance?

There’s no way to predict when you may need managed healthcare over an extended period of time, since even accidents, illnesses and injuries can leave you dependent on expensive long term care services. While most people buy Long Term Care Insurance when they near retirement age, it’s a good idea to add it to your portfolio as soon as you can afford it.
Premiums also increase as you get older and age-related issues set in, along with the possibility of not being eligible for coverage. Start planning for your Long Term Care needs when you’re young and healthy to ensure a comfortable, happy and stress-free future!

How Much Do Long Term Care Services Cost?

While the cost of long term care varies depending on where you live, managed healthcare is quite expensive, and the costs are rising every day. The cost of spending a year in a nursing home averages almost $100,000, with home care being even heavier on the pocket. Even basic assisted living facilities can cost $40,000 a year!
If you account for inflation and the rising life expectancy, you could end up spending all your retirement savings on long term care if you aren’t insured.

Does Approval Depend Upon Current/Future Health?

Health issues can definitely affect your long term care insurance approval or eligibility, which is why it’s best to buy coverage when you’re young and healthy. Insurance companies underwrite policyholders and decide upon a premium rate based on their mental and physical health, so if you have a serious medical condition, you may not be approved.

Typically, though, you can get long term care insurance coverage even with existing conditions with. You may pay higher premiums, in this case, so it’s best to consult an independent insurance advisor to discuss your options.

Long Term Care Underwriting and Premiums

The underwriting process is primarily based on your age and employment status, with recent medical records and an interview sometimes playing a role in the screening process. Premiums are also decided as per your age, along with factors like the coverage amount, waiting period for benefit payouts, inflation riders, etc.

Remember, premiums increase as you grow older, but you may receive a discount if you’re married or invest in the plan with a sibling residing the same household as you. There are many other factors that determine your final premium, and an advisor can help you understand these in detail.

Long Term Care Insurance and Tax Advantages

Almost every Long-Term Care Insurance plan offers some tax benefits, since the government is keen to reduce the burden upon Medicare and Medicaid programs for long term care services. Investing in qualified plans while planning for long term care can help reduce your tax burden, both with federal and state taxes.

Some plans are also available under the State Long-Term Care Insurance Partnership Program, which reduces the financial impact of investing in long term care insurance on your assets and income. An experienced advisor can help you understand the intricacies and select a policy that maximizes your benefits at the lowest cost.

What about Government-Sponsored Long Term Care?

Confused about the difference between Medicaid, Medicare and Long-Term Care (Long Term Care) insurance? If so, you are one of many.

The government does offer some relief to those who need long term care services, but the benefits are limited. With Medicare, you may be covered for up to 100 days of skilled nursing home care, but only under certain conditions. It does not offer financial assistance with homemaker services, home health aides or assisted living.

To qualify for Medicaid, a person should require assistance in performing at least two ADLs (Activities of Daily Living) as well as guidelines for income and assets. It typically comes into play for skilled nursing home care only after you’ve spent enough of your own assets to qualify for Medicaid, and not all nursing homes will accept you.

Neither of these are ideal solutions for long term care, especially if you want to protect your assets, maintain independence over your care options or receive care in the comfort of your own home.

When you’re going for Long Term Care Insurance as an individual, expert guidance is invaluable.

At LifeCentra, our financial advisors will help you explore various plans, as well as explain the process, benefits and disbursement when needed, to help you find the right fit. Get in touch with us to discuss your needs right away!

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