- November 21, 2020
- Posted by: Michael Gunning
- Category: Long Term Care
We hate to have to tell you this – but there’s a good chance you may require long-term care as you get older. Worse, if you’re like most Americans – you haven’t exactly figured out how you’re going to pay for this type of help.
Almost half of American adults who turn 65 this year are going to develop a disability serious enough to warrant assistance with their daily life. Only 11% of our population holds a long-term care insurance policy that can assist those folks with the various costs of care.
In many cases, folks don’t start to think about the need for this sort of coverage simply because they’ve underestimated the costs associated with LTC (long term care). Many also mistakenly assume that Medicare and health insurance will be enough to cover everything.
You also have the outright cost issue, with long-term care insurance costing a hefty sum, this serves as yet another deterrent to getting covered. The very idea of paying a hefty premium for an insurance plan some may never use, leaves many to sour on the entire idea. In recent years however, companies have developed a new alternative to the traditional use-it-or-lose-it long-term care insurance plans most know of.
A hybrid life insurance product is one that provides long-term care coverage ONLY if there is a need, OR a death benefit if the policy isn’t used to pay for long term care. In this way, you can receive a benefit regardless of the outcome of your situation.
Before opting for one of these products, understand what they are and whether they’re right for you.
Understanding The High Costs of Long-Term Care
Some folks wonder why they should even need to worry about insuring themselves against the costs of paying for long-term care out of pocket.
According to insurer Genworth’s 2019 Cost of Care Survey, the median monthly cost of an assisted living facility is now up to $4,051.
Which means that if you would like to receive care from the comfort of your own home, the average monthly cost of a home health aide is going to run about $4,385. If you require more advanced health care, the median cost of a private room in a skilled nursing facility is $8,517 a month. Unfortunately, Genworth is also estimating these costs will rise again to almost double over the next 20 years.
If you’re now in your 50’s and will need care in your 70’s, you may need to spend upwards of $100,000 to $200,000 a year. For older individuals who require a high level of care, the average length of that care period is 3.9 years, according to the Bipartisan Policy Center. I
Sadly, if you fall into this category, the healthcare may cost several hundred thousand dollars.
Why You Don’t Want to Count on Medicare or Medicaid
Medicare can pay for brief stays in a skilled nursing facility for rehabilitation or therapy services after a hospital stay. However, it is not going to pay for long-term care costs, and the assistance given must fall into the following categories – called the “activities of daily living”:
- Using the toilet
- Transferring (to or from a bed or chair)
- Caring for incontinence
This is basically the kind of attention that someone who is experiencing extreme physical or mental decline. It can definitely be provided be provided in your own home, through community-based services such as adult day care, but may also take place within a facility.
Unfortunately, many people continue to rely on Medicare or Medicaid as a means of paying for long-term care even though the coverage can be very “thin” at best.
You Can Use Life Insurance to Help Pay These Costs
An LTC insurance policy can usually be used to cover expenses when a policyholder is no longer able to perform two of the six activities we listed earlier, or is showing signs of visible cognitive impairment. This will cover the cost of care within your home, at an adult day care center, and even in an assisted living facility or skilled nursing facility.
Many LTC policies can also cover building modifications to your home if they would make it easier for you to remain there and receive care. Perhaps a lift for your stairs, for example, could be covered by this type of policy.
The amount of coverage these types of policies provide does depend on your benefit period, in addition to the actual benefit amount you select. An average benefit period for most policyholders is around three years. The typical plan pays out between $3,500 to $5,000 a month in benefits, which can be a lifesaver for many. A maximum benefit will be based on the monthly benefit amount as well as the benefit period. As an example, if you have an LTC policy that includes a $5,000 monthly benefit and a three-year benefit period, you would be looking at a maximum benefit of around $180,000 total.
It’s important to sit down with your Elder Law Attorneys to determine how long you may require assistance alongside how much you may be able to afford, as you can see now how long-term care insurance could be used to help you pay for at least some care, but perhaps even the entire cost of your care will be covered depending on the policy you choose.
Traditional long-term care policies come with a true use-it-or-lose it proposition. Essentially, if you don’t end up needing long-term care, you’re left with that feeling that all of those premiums were paid for nothing.
If you’re considering a hybrid policy or a stand-alone long-term care policy, it’s a good idea to work with someone who specializes in long-term care placement. One-size certainly doesn’t fit all.
Please contact our office at 509-328-2150 today to be connected with an expert Elder Law Attorney that will help you weigh all of your LTC insurance options and ensure you get the correct coverage for you. If you’re interested in learning more about Long Term Care, please see this resource from Forbes, or visit the Washington State Department of Social and Health Services to get more specific on our state laws and other requirements.