Long-Term Care Insurance: Worth the Cost or Overpriced Con?

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Insurance is supposed to grant peace of mind that, in a worst-case scenario, necessary funds will be made available to us. That’s why we purchase life insurance for our families, home insurance for unforeseen disasters, and health insurance for employees. Policies are supposed to protect our loved ones as well as ourselves in the event of a tragedy. But where does long-term care insurance fit into all this?

Unlike other types of insurance that focus on accidents and catastrophes, long-term care insurance recognizes that some circumstances are the result of nature running its course — like aging. But is it really necessary, or just another “extra” you can do without?

Why even consider long-term care insurance

Despite the somewhat misleading name, long-term care insurance may be able to be used for other things, such as home care services. However, many people never even consider buying long-term care insurance because they are under the false impression that their present insurance or federal programs will cover the cost of an institution if needed. Unfortunately, for the most part this is a myth.

Very few, if any, health or disability insurances cover what is known as “residential care,” or the room, board, and medical services seniors are likely to need. Medicare covers SAR (sub-acute rehabilitation) centers, but only if the stay is short-term, and only in full for the first twenty days. Medicaid covers residential care, but only if the policy holder meets certain income requirements. Usually, to qualify for Medicaid in the first place, you must have very little in the way of assets and savings.

When to consider doing without long-term care insurance

If you’ve enjoyed a high income for many years, and plan to have enough savings to cover the cost of a long-term care stay (which may last several decades), you may be able to do without long-term care insurance. Contrarily, if you are currently on Medicaid, and don’t see yourself coming off it as you age, a long-term policy would also likely be a waste.

When to consider buying long-term care insurance

What if you’re in a middle income bracket, with not enough saved up to cover the cost of an institution, but too much to qualify for Medicaid? In that case, it’s possible you may be the ideal candidate for a long-term care insurance policy. This type of insurance isn’t a “con” – it’s definitely a legitimate business practice engaged in by hundreds of companies. Whether it is overpriced depends on how much you pay for your premiums, and whether or not you ever use the benefits.

Things to keep in mind before you buy

If you do decide to purchase this type of insurance, there are a few things you’ll want to keep in mind.

  • It is much easier and cheaper to buy long-term care insurance while you are younger and healthier, before you actually need it. By the time you are already in a nursing home, it’s too late. The average age for those purchasing long-term care insurance is sixty.
  • There are many incidentals the insurance does not pay for, including medication and clothing. Be sure to include items like these in your budget when planning for retirement.
  • Certain conditions make you ineligible for long-term care insurance, including a diagnosis of AIDS or an AIDS-related illness, metastatic cancer, a history of strokes, a progressive neurological condition, and Alzheimer’s or a dementia/cognition-related condition.

Long-term care insurance: it’s up to you

Ultimately, it’s up to you to decide whether purchasing long-term care insurance is in your best interest. But no matter what, before buying any policies, make sure you know exactly what you’re getting and for what price, including possible rate increases in the future. Make sure whatever insurance agent you’re using answers all your questions completely. Otherwise, in your golden years, you may find yourself owning nothing more than a very expensive piece of paper.

If you are unsure of how to best help an aging loved one, the trained and compassionate staff at the Institute on Aging is here to help you make that decision and gain the best in at-home senior care. Contact us to find out more.

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