What is Long Term Care Insurance & Do You Need It?

Aging is a part of life, and it’s inevitable that we’ll need assistance of some kind as we grow old. However, just because everyone ages, that doesn’t mean that everyone needs long term care insurance. When making a choice on something like long term care insurance, you’ll need to weigh the pros and cons and consult with a financial advisor.

If you need assistance with your finances, work with a professional financial advisor from Good Life Financial Advisors of Mt. Pleasant. We’re ready to help create a personalized plan for your specific needs.

What is Long Term Care Insurance?

Long term care insurance is a comprehensive term covering a number of different types of services. For many people, long term care insurance is needed following some type of medical event like a stroke or heart attack, or due to a worsening degenerative condition like Alzheimer’s disease. Long term care insurance covers the following types of services:

  • Occupational, speech, or physical therapy
  • Rehabilitation services
  • Nursing care
  • Personal care
  • Homemaker services

Long term care insurance helps protect against the possibility that we lose our faculties at some point in life. For example, if you have a stroke and need assistance cooking meals, buying groceries, and doing math while paying bills, a home health aide or nurse can be quite expensive when paid out of pocket. With a comprehensive long term care plan, these services will be covered and you can avoid the stress of tapping a nest egg in order to pay for extra medical care.

Long term care insurance can cover not only home health services like a nurse or occupational therapist coming by a few times a week, but also the costs required to live in a senior nursing home, assisted living center, or Alzheimer’s care facility. Additionally, long term care insurance can also be used to cover certain end-of-life expenses like hospice care.

What Factors into the Price of Long Term Care Insurance?

Like most insurance products, providers include a number of different factors into the formula for policy premiums. One of the most critical of these factors is your age. Long term care insurance is much cheaper when purchased when we’re younger and less likely to suffer a medical ordeal that would cause us to need care. But as we age, the risk of medical problems increases, and so does the price of long term care insurance.

Some other factors that are included in the long term care insurance premium include:

  • Type of policy purchased
  • Level of coverage selected

Two important aspects of long term care insurance to consider are the Benefit Trigger and the Elimination Period. The Benefit Trigger is how the insurance company decides if you are eligible to begin receiving care—this usually involves a health assessment from a medical professional. Benefits from long care term insurance won’t be distributed without this assessment.

The other aspect is the Elimination Period, which is the time that must pass after the Benefit Trigger before payment will be disbursed. This period can be as short as 30 days or as long as 3 months, and all care must be paid out of pocket during this period.

Who Benefits Most From Long Term Care Insurance?

Long term care insurance isn’t needed for everyone. If you have a large nest egg built up and can afford the out of pocket costs of nursing home facilities or home health aides, long term care likely isn’t necessary. Also, if you’re already in your mid-60s and have existing health conditions, a long term care insurance policy could be limited or exorbitantly expensive.

Long term care insurance is most beneficial to people who are nearing retirement age but don’t have the necessary assets built up to afford the costs of long term care on their own. For example, if you have a $400,000 nest egg but no long term care insurance, annual nursing home costs could exceed $100,000, and that would deplete your nest egg quickly.

Final Thoughts

Buying long term care insurance is up to the individual (or married couple). Unlike retirement savings or health insurance, long term care insurance isn’t something everyone needs at some level or another. Long term care insurance can bring peace of mind to those without large amounts of savings, but it is a costly form of insurance, and there’s always a chance you’ll never need it.

Traditional long term care policies can provide a number of different benefits, but it’s also worth considering a hybrid long term care/life insurance policy that allows clients to spend unused long term care money on expenses usually covered by life insurance. But as always, consult with a financial advisor before buying any type of expensive insurance or financial product.

Work With an Experienced Financial Advisor

We hope you understand what long term care insurance is and have an idea of if you might need it. For professional assistance, consult with a team member from Good Life Financial Advisors of Mount Pleasant today.