Financially savvy people would do well to consider either long-term care insurance or a hybrid policy, since the odds are good that you or your spouse will need some type of long-term care as you get older. We can answer the most common questions and help you get a quote for either long-term care insurance or a hybrid policy.
What is Long-Term Care Insurance?
Traditional long term care insurance: this works like car insurance: you pay a premium, and if you need long-term care, your insurance covers the cost. If you never need long-term care, your insurance company keeps the money you spent on premiums.
Traditional long-term care insurance was offered by hundreds of companies in the late ‘90’s/early 2000, but thanks to some dramatic miscalculations there’s now only about nine or ten companies offering this insurance. That’s too bad, because many of the people who purchased long-term care insurance faced either paying premiums two or three times what they had budgeted for or letting the insurance lapse—just when they were more likely to need it.
Hybrid policies: These are permanent life insurance policies with money for long-term care insurance attached. Unlike traditional long-term care, premiums of hybrid long-term care insurance policies are fixed for the life of the policy. Historically, these were single-premium payments, but now many companies offer 10- year-pay or 12-year-pay options. These policies have the advantage of making a large pool of money available in case you need long-term care, and a tax-free death benefit passed onto your heirs if you don’t. If you change your mind, most offer a return of premium option.
Who Needs Long-Term Care Insurance?
Sadly, the odds are you will need some type of long-term care, as around 70% of those 65 and older wind up needing it. An extended stay in a nursing home can easily consume most or all of whatever nest egg you’ve built for yourself. You could opt to go broke so that you qualify for Medicaid, but most people would prefer to keep their money. Also, many nursing homes don’t even accept Medicaid patients, so you’ll be limited as to where you can receive care. You may be looking at some not-so-nice options.
What does Long-Term Care Insurance Cover?
Long term care insurance (or the hybrid policy type) covers things like:
- Nursing home care
- Assisted living
- Home health care
- Adult day care
- Occupational therapy
- Hospice care
- Home modification
In addition, many policies will cover things like housekeeping or meal preparation if you are unable to do it yourself.
When is the Best Time to Buy Long-Term Care Insurance?
You want to buy a policy when you’re still in relatively good health so premiums will be less expensive. Also, underwriting is required for some hybrid policies and most long-term care insurance. You won’t qualify if you have a debilitating condition such as diabetes or heart disease. Some people recommend buying such insurance at age 55 or so, but if you’re considering a hybrid policy, really, there’s no time like the present.
What is a Long-Term Care Insurance Quote?
A quote is an estimate, or a ballpark figure. What you’ll end up paying may vary according to certain factors. BravoPolicy can offer you a free quote from up to five traditional and/or hybrid policies with no obligation.
What Affects a Long-Term Insurance Quote?
Many factors affect your quote, such as:
- Marital status—many companies offer couples discounts
- Daily benefit—how much money you’ll get per day
- Coverage duration—how long the policy is good for (usually 48 months, or 4 years)
What should You Pay Attention to When Comparing Quotes from Different Companies?
Comparing quotes can be more difficult than it needs to be, because different companies use different words to describe the same things. They can also structure the policies differently. Here are some things you’ll need to keep in mind when comparing quotes.
Reimbursement vs. indemnity
Reimbursement policies require you to keep receipts of what you spend on long-term care. You will then turn these in at the end of the month and get reimbursed. These will pay for the actual cost of care. In other words, if your daily benefit is $170 but your care costs $150 a month, you’ll be reimbursed for $150 a month. The extra goes to your future care needs. If you pay $200 a month, you’ll pay for the excess $50 out-of-pocket.
Indemnity plans give you a check every month. You don’t need to keep receipts, and if your care costs less than the amount of money you receive, you can keep the extra to do whatever you like with. These plans tend to cost more, but it may be worth it.
Compare both the monthly benefit amounts and the benefit period. The benefit period is a pool of money available by multiplying your daily benefit by your benefit period. So, if your policy offers a $6000 monthly benefit and a 48-month benefit period, the pool of money available to you is $288,000.
If you’re hoping to travel or retire overseas, make sure to compare what kind of overseas protection companies offer. Some companies make 100% of the daily benefit available no matter where you are, some only 50%, and some require you to add-on a rider to cover the possibility of international care.
The amount of inflation protect you get will determine the future value of your coverage. Health care costs rise all the time, so inflation protection is extremely important. If you buy a long-term care policy when you’re 55, you won’t (hopefully) need the insurance for 20 years or more.
It can be tricky to compare inflation protection, because the lower costs of a policy with no inflation protection may be very appealing. But keep in mind your money will not go nearly as far in 20 years—it essentially decreases in value. Compound inflation protection is better than simple inflation protection, as you increase your benefits at a faster pace.
Inflation protection is usually offered as:
- No inflation protection
- 3% simple
- 3% compound
- 5% simple
- 5% compound
Married couples can qualify for discounts of up to 40% if they’re both under the same policy. This discount is extended to gay and lesbian couples as well, for the most part. There are some exceptions.
As we know, the long-term care market has had difficulties. You want the company you buy your insurance from to be financially stable so that they can weather any changes in the market.
A company with excellent coverage will be soured if they are reluctant to pay claims or if they’re agents are rude and difficult to deal with. When you make a claim, you’re already under stress. You don’t want your insurance company to be the source of more stress.
A lot goes into a quote for either traditional long-term care insurance or hybrid insurance. Make sure you’re comparing apples to apples when comparing the features of different policies.