Are you considering long-term care insurance? That could be a wise decision. According to the U.S. Department of Health and Human Services, nearly 70 percent of all Americans age 65 and older will need long-term care at some point in their lives.1
Many retirees will require long-term care for months, and maybe even years. That kind of care and support can be costly and could possibly drain your retirement savings. That's why it is important to consider your long-term care needs now. Long-term care insurance can help you pay for the level of care you desire and protect your assets.
Not all long-term care insurance is the same, though. There are a number of different features and variables available on every policy. You can often adjust these features to change the policy’s premiums and benefits. Below are five key factors to review and consider before you purchase long-term care insurance:
The daily benefit is the amount the policy will pay per day toward your long-term care. Nursing homes and long-term care facilities often price their services on a per-day basis, so it makes it easy to determine how much your policy will cover and how much you may have to pay out of pocket.
For example, your long-term care facility may charge $250 per day. If your policy pays a maximum of $150 per day, you will have to pay the remaining $100 per day yourself. Generally, the higher the per-day benefit, the greater the policy premium.
The benefit period is the maximum amount of time the policy will pay for your care. For instance, your policy may have a one-year limit, a three-year limit or possibly even an unlimited period. As you might imagine, the longer the benefit period is, the greater your premium is likely to be.
If you use your entire benefit period and still need long-term care, you will have to pay for it yourself. It’s important to find a compromise benefit period that provides sufficient protection and also keeps the premiums within your budget.
Benefit triggers are the events that initiate benefit payments from the insurance company. Simply, they’re the signs that require long-term care and allow you to exercise your policy.
In many policies, the benefits are triggered by a failure to perform activities of daily living, such as bathing, dressing, eating, walking and more. Your policy may state you must be unable to perform a certain number of these activities before benefits are paid.
Other policies might require doctor certification stating you do, in fact, need long-term care. There’s nothing wrong with either option. It’s simply important you know how to trigger your benefits should you need them in the future.
The elimination period is the amount of time between when your benefits are triggered and when they are paid. It’s usually measured in days. You may find a policy with no elimination period, but many have periods ranging from 30 to 180 days.
During this time, you will have to pay for your care out of pocket. Medicare may also partially cover some costs for several months. You can drive down the premium by extending the elimination period. However, also consider how long you might be able to pay for care yourself.
Inflation is another important consideration with regard to long-term care. It’s likely you may purchase the policy today but not need it for several years, possibly even decades. Long-term care costs will likely increase during that period.
An inflation protection rider increases your daily benefit to keep up with rising long-term care costs. That helps to insure your benefit will be just as robust in the future as it is today. An inflation rider usually increases the premium, but it could be a worthwhile feature.
If you’re not familiar with long-term care insurance, you may be a bit overwhelmed by your options. Contact us at Gregory Financial Group to learn more about your long-term care options. We can help you develop a strategy that meets your needs and your budget.
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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