Long term care insurance (LTCI) is a hot topic among generations. Is it or is it not a good type of coverage? Well, for the majority of current policyholders, this type of insurance seems to be doing the trick. Studies show that 90% of individuals covered by LTCI are satisfied with the costs, and 89% state that they did not have to purchase additional services on top of their policies. This means that these individuals get to keep their independence as they navigate growing older in America. There is a bigger chance for their assets to remain untouched and for their children to continue pursuing whatever they desire without having to take on the responsibility of caregiving.
It sounds amazing, doesn’t it? After all, that is all many of us have ever wanted.
However, it does take more work than most people think. It requires a great deal of research and planning. Why? You may ask. That is because LTCI does cost a substantial amount of money, and you would have to be very strategic in dealing with it. This insurance policy may come with a cost, but it is still less of a blow to the finances when compared to the health and long term care costs which seem to be increasing each year. Compound that with the longer life spans that people are experiencing, and all bets are off.
In our last post, entitled Essential Preparations in Handling Long Term Care Costs, we shared with you the different ways you can make room for the costs of long term care in your finances. For today’s article, we will be guiding you through the different ways you can purchase LTCI securely and successfully.
Initial Steps in Securing LTCI
Circumstances are all different for everyone. What may work for someone else might not work for you. Financial capabilities are the same. What other may or may not be able to afford may not be the same as the ones that are within your reach. This is why examining the factors unique to your situation important.
Here are a number of factors to consider regarding financing for LTCI:
- Identify your assets
- Identify your annual income
- Find out how retirement can affect your ability to pay for premiums
- Learn about the average cost of a policy
- Talk with your family about the payment and if any of them will be contributing or shouldering the costs
- Ask about the pattern of the rise or drop of prices for the premiums
- Determine the age you plan on owning a policy
It is important to note that the characteristics of policy buyers are shifting. Younger individuals are becoming increasingly aware and proactive when it comes to their long term care coverage. As cited in The State of Long-Term Care Insurance: The Market, Challenges, and Future Innovations, the most recent data shows that the average age of buyers is 59 years old with more than half went to college (71%) and are employed (69%). In the year 2000, the average age was 65 years old with less than half went to college (47%) and were employed (35%).
Industry experts have always been vocal about the importance of purchasing early, and it appears that more and more people are listening. Consult with a LTCI agent to determine when the optimal time is for you to purchase a policy.
Different Methods in Purchasing LTCI
You may secure a long term insurance policy in four ways as stated a Shopper’s Guide to Long-Term Care Insurance. You just have to decide which works best for you and your family members.
These policies are sold by agents or insurance companies via phone or mail. Bear in mind that insurers may offer different types of policies so consult with the agent to find the one that best fits your needs and circumstances.
Policies Offered by Employers
Some companies may offer LTCI coverage to their employee in two ways: group or individual plans at a group discount.
This option is advantageous so you might want to check with your employers. People under group plans may not need any medical requirements or go through medical screenings to qualify. On top of that, individuals insured through their employers must be able to keep their coverage after they leave their jobs, get fired, or if the company cancels the plan. Retirees, spouses, parents, and parents-in-law may also apply for a plan.
Federal or State Government Policies
The Federal Long Term Care Insurance Program are typically lower than the usual premiums that other individual pay, but people with this coverage will have to make the payments. This type of policy is offered to Federal and US Postal Service employees and retirees, active and retired service members of the uniformed services, as well as their qualified relatives.
Similar to employers offering group policies to their employees, associations may also offer LTCI to their members through an agent or an insurance company.
LTCI partnership policies offered in some states protect individuals who wish to qualify for Medicaid from spending down their assets to become eligible.
Also worth mentioning are Share Care policies which allow people in relationships—married or not—to amass a pool of benefits they both can use.
How Do I Claim the Policy Benefits?
Companies typically pay the policyholder’s benefits in three ways: Indemnity, Reimbursement, and Cash Benefit. Before purchasing a policy, you must decide which of the three options works best for you needs and circumstances.
Here is how the three types of plans work:
- Reimbursement Method – This method covers costs the traditional way. A reimbursement plan pays after you have received the services. However, it will not pay more than the qualifying LTC expenses incurred. As this type of plan only pays the exact costs spent within the time frame, this potentially allows policyholders to receive benefits for a longer period.
- Indemnity Method – Policies that cover through this method will pay the maximum benefit regardless of the actual expenses incurred. If you go beyond the set amount, then you must shoulder the additional costs. However, if the services cost less than the set amount, the policy allows you to tuck away more money in the bank.
- Cash Benefit – This type of plan is largely similar to the Indemnity policy. What is important to note about this one, though, is that policyholders can use this payment for anything. This plan is ideal for those receiving care in their homes as they can use the cash benefit to pay for the services of family caregivers.
It is important to know the way your policy will be covering the benefits. Be sure to ask your LTCI agent about payment method.
Which Services are You Paying for?
LTCI plans are usually tailored to fit the needs of policyholders. However, there are services which are typically covered. Let’s take a look at the services:
- Assisted living care in a licensed assisted living center
- Nursing home care in a licensed nursing facility
- Adult day care in a licensed facility which includes therapeutic or nursing care, educational and social activities, and personal supervision
- Skilled nursing care, therapy (occupational, speech, physical, and rehabilitation), and help with personal care at home
- Home health care services through a licensed home health agency which include physical therapy and skilled nursing care
- Care facilities that deal with Alzheimer’s
- Respite care
- Hospice care
As listed in the Board on Aging and Long Term Care in the State of Wisconsin, other companies may also include ambulance services, bed reservations, care coordination, caregiving training, home modifications, international coverage up to 30 days, waiver of premium, equipment purchase, adult foster care, and restoration of benefits. Check with your provider and state if any of these are covered.
Additional Notes Before Purchasing LTCI
As you as spending a big portion of your money for this coverage, it would be wise to find ways maximize your LTCI. Here are additional tips for doing so:
- Research on the costs of care – Some states have lower rates when it comes to care services. Learn more about the different price ranges and see if you are in an ideal location. As an example, the monthly rate of a room in an Assisted Living Facility in Alaska is priced at $5,750 while the same accommodation in Louisiana is only at $3,155. Click the link to proceed to the different prices in each state to compare cost of long term care.
- Request for more than one quote – Companies may provide different services and different rates. This is why you should have multiple options on the table before you choose. These quotes are free, so consider all alternatives available.
- Choose the right company – A good LTCI coverage depends on a company’s stability. Check the insurer’s rates history, and see how they dealt with increases. Also, look through their customer feedback and see if they provide good service.
Remember that LTCI is an investment, so take the time to look at it from all corners before diving in. Your health, independence, and happiness matter, so make the necessary preparations to safeguard them.