Long-Term-Care Insurance: Is It Really Worth the Cost?

“Much of what once constituted sound retirement advice has to be thrown out the window.”

So wrote Independent Living contributing editor Seth Van Brocklin in an article on the current economic and political environment. Giving one example, he stated, “Old rule: rely on personal savings and support from children for long-term care needs. New rule: obtain long-term care insurance to guarantee access to first-rate facilities.”
Most estimates figure the average cost for long-term care is $40,000 to $70,000 per year. Actual costs can fluctuate quite a bit depending on location and the level of care provided. You can find the average costs in your area by viewing Genworth’s interactive Cost of Care Survey.
What’s even more troubling for anyone trying to plan ahead is that these costs are based on current levels. And, as you know, deepening government involvement in complex health care issues has caused prices to spiral and quality to plummet. Even today, many Americans find themselves financially sandwiched in the middle. For instance, they need to save for and fund their children’s rising education costs and at the same time support their parents’ growing health-care needs (for many, this is done before addressing their own retirement needs).
In her book, Elder Rage, author Jacqueline Marcell recounts her experience caring for her parents without the aid of a long-term-care insurance policy:
“I suddenly had to become a full-time caregiver for my elderly parents, both with health problems and starting to develop dementia (namely Alzheimer’s)… After we burned through their life savings, and then started chipping away at mine, I was advised to apply for financial assistance [through] Medicaid… It was quite a long process with mounds of paperwork and numerous investigations…
“Even though caring for every aspect of my parents’ last years was the hardest thing I have ever done – I am proud to say I gave them the best end-of-life I possibly could…
“Had I only known to insist that we buy Long-Term-Care Insurance for them prior to their illnesses, their in-home care could have been paid for, and I could have saved myself so much misery, not to mention a small fortune.”
Long-term-care insurance could help smooth out an often-difficult situation: providing the best possible care for a loved one and help pay for it.

Why Is Long-Term-Care Insurance Necessary?

Many people are surprised to learn that long-term-care insurance covers the health care needs that are NOT covered by medical insurance or government aid such as Medicare or Medicaid.
An individual needing long-term care is not necessarily sick in the normal sense. The triggers are if the individual cannot perform some of the basic “activities of daily living” (ADLs), which are dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or a chair), and/or walking.
Long-term-care needs are not bound by age, either. Imagine a young adult fully or partially paralyzed from a car accident or a middle-aged person who suffers a stroke. Medical insurance won’t offer any help needed to get on with life: dressing, eating, bathing, etc.
Note: When shopping for a long-term-care policy select one that needs fewer ADL triggers to begin paying. i.e. Two out of the seven ADLs (or one out of seven) is better than three out of the seven. Also, pay attention to “walking.” Some policies do NOT consider walking an ADL.
For this reason it is important to start looking for a policy earlier rather than later; doing so can also keep premiums lower over the life of the policy.

What Does Long-Term-Care Insurance Cover?

Generally speaking, it helps cover the cost of using an assisted-living facility, home care, respite care, adult daycare, hospice care, Alzheimer’s facility, and/or nursing home. The above forms of care are options that you will choose for your policy, and the more options covered, the more the policy tends to cost.
Note: most people feel more comfortable being cared for at home. Make sure to discuss home-care options and whether a cash-paying policy is available. With this set up, the insurance company pays a daily cash amount directly to the policyholder/family, which gives the family more options. For example, a family member could take time off from work, care for the loved one, and be compensated through the cash disbursements from the policy. This way the loved one can be cared for by a willing family member and not feel like he or she is a financial burden.

Some Tips for Lowering Premium
Costs and Making Sure
You Have All the Care Necessary:

  1. Lower your premiums with tax deductions. Ask your professional to explain tax deductions you may qualify for, or tax-related benefits through your employer or your own business that can save you money on your long-term-care insurance.
  2. Use an independent insurance broker who specializes in long-term-care insurance. Independent brokers typically have access to multiple carriers and will often represent your best interests.
  3. Longer elimination periods may reduce premium payments. An elimination period simply means a waiting period. For example, waiting 90 days instead of 10 days before the insurance company begins paying will lower your costs.
  4. Adjust your benefit period. This relates to how long you want the insurance company to cover your care. Choosing a shorter timeframe such as 5-year coverage costs less than lifetime coverage.
  5. Spouse and domestic partner discounts. Applying at the same time as your spouse with the same insurance company can give you a discount as well.
  6. Protect yourself against inflation. Consider buying a Cost of Living Adjustment (COLA) Rider. This enables your benefit amount to increase over time. The increases can be set to either simple interest or a compound interest. The simple interest method costs less and may make more sense for an older policyholder.
  7. Double check the policy you’re considering buying. Does it cover all the forms of care you want (i.e. nursing home, home care, assisted living, etc.)? Is walking considered an ADL? Is a mental disorder such as dementia or Alzheimer’s covered, even if your loved can perform all ADLs? Be aware of any exclusions for preexisting conditions.
  8. Understand the triggers in the policy you’re deciding on. Does your loved one need assistance with one out of seven ADLs or three out seven ADLs before the policy goes into effect? Does a doctor need to write a letter to the insurance company?
  9. Don’t buy into weak insurers. As with any form of insurance, check the financial health of the insurer before you buy. Stick with higher rated companies, as their solvency for years into the future is critical!
One of the most important things a long-term-care insurance policy provides is peace of mind for you and your family. It helps protect assets and can give the loved one in need better care and more independence, as well as avoid feeling like a burden to others.
Unless you are independently wealthy and can self insure, owning at least some coverage is better than nothing. Even if the policy doesn’t cover 100% of the costs at the time of the need, any amount can help defray costs and get better care for you or your loved one.