“Do I really need long term care (LTC) insurance?” This is perhaps one of the biggest questions that baby boomers are struggling to answer. One the one hand, these policies provide comprehensive coverage that gives them the peace mind in knowing that their care expenses are covered. It helps them sleep better knowing that they will not have to struggle with the costs of care, especially during the time when their income is not as substantial as before. On the other hand, an LTC policy can be costly if not planned correctly. This leads people to think that maybe they can skip on LTC insurance plans altogether.
However, they fail to realize that this type of coverage provides two of the most important goals that older individuals strive for: independence and control. LTC coverage paves the way for baby boomers and retirees to age the way they want in a place of their choosing. These policies do so by targeting the issues that come with aging in the United States today.
Understanding the LTC Situation in the United Sates
First, let us discuss the growing problem in the world of LTC by answering this question: What is the average cost of LTC? As you may know by now, the costs of care services in the country have become too expensive to for most Americans. In fact, nursing home care in states, like Alaska and Massachusetts, would cost a person hundreds of dollars in just a year. Bear in mind that people typically need more than one year of LTC. According to research, men would most likely need 2.2 years of care while women typically need 3.7 years.
Furthermore, the situation becomes more worrisome as reports show that the average retirement savings a person in his or her 60s is approximately $172,000. As you can see, the twilight years are looking grim for aging America.
This leads them to resort to other measures to ensure they get the care they need. For some individuals who need less care or fit the specific criteria, these alternatives might work. However, it leaves a big bulk of Americans struggling to meet their needs using the limited coverage available within their reach.
Alternatives to LTC Policies
An LTC policy may be the ideal go-to in order to pay for care services as reports show that 90% of policyholders are satisfied with the coverage their policies provide. However, if you are not convinced that it can work for you financially or you have run out of time to qualify for a policy, you can look at the alternatives listed below to provide funding for your care.
Retirement Nest or Savings
You have all the freedom to self-insure when it comes to long term care. Self-insuring means building a fund that can only be tapped during times of substantial need or emergencies such as accidents, injury, and sickness or in this case, paying for long term care. Essentially, this means relying on your assets and savings to cover any care you might need in the future.
Initially, this seems practical, simple, and very feasible. After all, self-funding your care means you do not have to worry about paying for policy premiums. However, if your annual earnings are below $1,000,000, paying out-of-pocket for LTC is not advisable for you. The reason behind this is that your funds may not be able to shoulder costs of LTC services by the time you need them. Remember that although the costs seem high now, they will reach new heights in the coming years. The risks are too great, and you may be one miscalculation away from receiving a devastating financial blow that is difficult to recover from. That will leave you impoverished, and your next option would be to turn to government programs like Medicaid and Medicare.
Medicaid and Medicare
According to the survey conducted by the AP-NORC Center, nearly 40% of Americans believe that Medicare will cover their LTC needs as they grow older. It becomes a huge and unfortunate surprise when they discover later that Medicare will not fund these services. As stated on their website, LTC services are not considered medical care. This means that if LTC services are the only care you need, then Medicare will not cover the costs.
Medicaid, however, provides a broader scope of services. It covers personal care, home health care, adult daycare services, and nursing home stay, so it covers a big bulk of LTC services. The hitch here is that this program provides funding to those with limited income. You will need to meet their specific financial and health requirements to qualify for coverage. If this is the option you are going with, bear in mind that you might have to spend down your assets and savings to meet the eligibility requirements.
Deferred LTC Annuity
In this kind of plan, your annuity will be partitioned into two—one for LTC and the other will work as a traditional annuity does.
The LTC part can be accessed immediately and will be used for your care expense. It can pay off monthly, but the amount you receive will be based on the terms of your annuity.
This may seem enticing at first; however, you need to meet a set of health criteria before you can qualify for the LTC benefits. More so, the amount you receive may not be enough to meet the finance the care services you require.
As it name implies, a reverse mortgage is just a traditional mortgage that works the other way around. Consider it as a type of loan that allows you to borrow against the market value of your home. Once you sign up for this, you can either receive money one-time in the form of a lump-sum amount or on a monthly basis. You can use the cash to pay for LTC.
However, once you pass away, your home will go automatically to the lender. If you want to leave your property to your children or loved ones, you might find that this is not the best option for you. Additionally, you need to be at least 62 years old to qualify.
Why Having an LTC Policy Matters
There have been a lot of debates about LTC insurance policies and how reliable it is when it comes to the impending issues that come with care. However, remember that this is the product specifically designed to address these care concerns. Its goal is to provide enough coverage for an individual to age gracefully and independently. It seeks to give you the opportunity to control the care that you receive and so much more. Let’s take a look at the various aspects that help an LTC policy secure your independence:
The Freedom to Choose Where You Receive Care
One of the common misconceptions about LTC insurance is that it only provides funding for nursing home care. However, these policies cover a wide range of services, from home care to respite care. On top of that, these policies cover home care services from the first day they are needed. Although this depends on what is agreed upon, policies typically cover caregivers, companions, housekeepers, therapists, and private nursing.
If you think it, an LTC policy allows older individuals to age in place. This means that they get to stay in the community that they have grown to love without really worrying about the costs. And if they choose to receive the care that they need in a facility, then they have the freedom to do so.
A Lifeline for Family Caregivers
As mentioned above, these policies can help caregivers. As we all know, family caregivers are the safety nets of their loved ones in need of care. They take on the burden of providing these services, whether they are financially capable of it or not. In fact, these individuals have confessed to spending approximately $6,954 a year on out-of-pocket care expenses. On top of that, many have had to cut back on work hours or leave their jobs just to meet the demands of caregiving. It puts them in a compromising position because they would never leave their loved ones while they are in need.
Not many are aware of this, but LTC coverage can help them alleviate some of the stress because policies can provide cash benefits to their policyholders. This means that care recipients are provided with the choice to give compensation for the help that family caregivers do—services that are usually free. It also provides them the opportunity for a much-needed break because it can cover respite care.
The Important Role of Health Literacy in Planning
Health literacy is defined as the ability of a person to understand and interpret health information to make sound decisions about their own wellbeing. Like most insurance policies, you would have to digest a great deal of information.
This is why improving health literacy could mean better chances at maximizing benefits of a policy. This is why you must also do your part by researching and continuing to learn about the different aspects of these insurance policies. Lastly, be sure to update yourself on the new trends and developments that may affect your coverage. This way, you get to remain in control of your care.