Enviably, when researching about where and how parents are going to age, families will inquire about what is long-term care insurance.
Some families are fortunate to find out that their parents have access to this benefit which can greatly reduce the out of pocket cost for care.
Long-Term Care Insurance History
Long-term care insurance became popular product to sell in the eighties. It became a cash cow for insurance companies because premiums were being paid monthly for years with no benefits being paid out. This occurred for a decade or more.
By the nineties, many older Americans had purchased long-term care insurance and assisted living facilities were getting popular with the elderly.
Assisted living communities started offering tiered care services, where a resident could “add-on” services as they needed more care, allowing them to stay in the assisted living.
This became extremely popular and demand exceeded supply. Long waiting lists to enter assisted living communities became common.
At the same time private home care was growing in popularity as well. These two non-medical services were created from the need to allow seniors to avoid moving to a nursing homes and both were eligible for reimbursement by their long-term care policies.
At the turn of the millennium, the insurance companies’ payout began to increase dramatically as the greatest generation started needing their benefits.
The insurance companies underestimated two major areas:
- The increased life expectancy
- The increased cost of health care services
They lost their shirt.
Many companies exited the market and stopped selling policies until they were better able to understand the market better. For those who had policies some companies paid the benefit, while others were notoriously difficult to work with, hoping people would die before they received their benefit.
Long-term care insurance became wildly expensive to offset the cost of the prolonged payment periods that were associated with care.
If you wanted a long-term care insurance policy and you were older you likely wouldn’t qualify for a policy, but if you did, the cost was prohibitive.
Additionally, most of the policies were use it or lose it. This meant if you died suddenly, all the money you paid into the policy was pure profit for the insurance company.
This made self-insuring an appealing alternative to paying for a policy. If you never need it, it’s still your money to keep.
LTCI – Present Day
Today things have changed. There are different options for long-term care insurance.
While it is recommended to start purchasing the benefit in your fifties or sixties, there are products that can help people in their seventies that are still considered affordable.
Additionally, there are options where you get money back if the policy is not activated or used much making LTCi much more attractive.
There are some great tools you can use to determine if you should further investigate long-term care insurance policies that are found here.
Please don’t let the name of the company fool you, they are a private company selling LTCi policies and not affiliated with the U.S. government.
If you are looking to purchase a long-term care insurance policy, I would recommend you speak with Mike Harrington of Lifetime Insurance Planning, especially if you value personalized customer service.
Qualifying for Long-Term Care Insurance
There is a 90-day elimination period with most policies. This means you must pay out of pocket for 90 days before the insurance policy will kick-in.
Also, you need to prove that the policy holder can not perform a certain number of ADLs (activities of daily living). This usually accomplished through your primary physician.
If you are using your policy to pay for private home care or assisted living community services, you will need to provide ongoing documentation showing you are receiving these services. Usually the service provider and the insurance company work that out.
Wrapping It Up
Purchasing long-term care insurance is something everyone should consider.
While it might not be the best choice for everyone, having it be part of the discussion when planning how to age-in-place, it can help pay for a good amount of the costs.