We have all heard it before, packaged in various phrases and sentences. However, allow us to make one more exception. We, at one point in our lives, would need care services after 65. It may be at home or a facility, but 70% of people in their retirement years will need long term care that not many can afford on their own. A good number take the proactive step and purchase coverage, such as long term care insurance, as early as they possibly can, but not everyone does so. With those chances and our stress-ridden, fast-tracked lifestyles, we could easily join the ranks.
To many of us, 65 seems like a long time into the future, but what happens when we become part of the 3.7 million who end up needing it even before we turn 64? These are the individuals who have had accidents, operations, and even health conditions which have rendered them incapable of at least two Activities of Daily Living.
Without long term care insurance, what does this mean for our finances? The odds are against us, and we really cannot afford to delay planning.
Long Term Care Insurance and Premium Price Hikes
Long term care insurance by definition is a product designed to cover care services such as nursing home care, home health care, personal or adult day care for individuals with chronic or disabling conditions. In 2014, 4.8 million individuals were covered by these policies.
However, many are hesitant for a number of reasons, the top being the recent price hikes. A few months ago, the federal government announced that premiums for existing long term care insurance policies will increase, and various companies have also announced rate hikes. Naturally, this is causing a state of panic among potential policyholders. Some are forgoing this coverage option altogether.
However, a recent study showed that 97% of those who were notified of the increases will keep their coverage, with 56% of them choosing to maintain current costs.
Tips and Tricks For Long Term Care Insurance
So, as individuals searching for long term care coverage, how can we deal with the premium rates and increases? There are various ways in which we can tackle this challenge; we just need to find the one that best matches our situation.
Purchase a Long Term Care Insurance Policy Early
We are at that point when the need for long term care services is becoming an inevitable part of our future. Life spans have increased, but these extra years are often spent battling health conditions. A blessing and a curse, this increased time that humans are now experiencing have become additional sick years.
While the numbers seem terrifying, do not be afraid of the costs because you have the leverage of being young and healthy. All this news about rate increases and sky-high expenses can be intimidating, but they can also be managed. Time is on your side, so use it to your advantage.
Spousal Shared Care
Instead of buying two separate policies, couples—married or not—can choose this option instead. Through Shared Care, two individuals can have access to more coverage for less money. So how does it work?
Essentially, couples who each have a 5-year policy under Shared Care have a total of 10 years between them. So if your spouse ends up using two years of the policy, then you will have eight years at your disposal.
Opt for a Longer Elimination Period
The elimination period—also referred to as waiting period—is the time in which the policyholder pays for care out-of-pocket before the policy takes the reins. The longer the elimination period is, the lower the amount of premiums will be. Typically, individuals choose from 30-90 days, so make sure to calculate how much you want to pay for premiums and out-of-pocket expenses.
Reduce Daily Benefit Amount
The daily benefit is the predetermined amount that the insurance policy will pay for your care. The general rule is that the lower the daily benefit, the lower the premiums. So consider purchasing a lower daily benefit, then paying the uncovered portion yourself. This way, you are assured that a big part of the care is still covered despite paying lower premiums.
Choose a Shorter Benefit Period
Perhaps the most cost-efficient way to buy coverage is by not purchasing a lifetime policy. The immediate reaction to learning about the possibility of long term care is to find coverage that will cover all the bases, even the unnecessary ones. However, this could mean more dollars to deduct from your bank account.
Unless there are cases of chronic illnesses in your family, then opt for a benefit period of no more than five years. For most individuals, three years of coverage is already sufficient for their care needs.
The Cost of Long Term Care in America
America’s price tag on long term care services is worrisome for the majority. According to Genworth’s Cost of Care Survey for 2016, the national median costs for homemaker services and home health aide are $45,760 and $46,332 a year respectively. Assisted living facilities are not far behind with a median annual price of $43,539. Nursing home rates are at a substantial cost of $82,125 for a semi-private room or $92,378 for a private room. Adult day health care is priced at $17,680 annually.
Depending on our needs, the expenses could even reach levels where we would have to depend on our children for the financial support and physical care. This, then, starts a cycle of older individuals unable to pay for care, so they rely on their children for support. This leads to a new generation unable to prepare for their own future needs. Without coverage, this is our future.
We really ought to break this cycle now. There is no better option than finding coverage that is designed to address this specific issue. Consult with an insurance agent and request for a long term care insurance quote. After all, we just want peace of mind as we grow old, right?