For decades we’ve been told to plan for retirement, with experts advising setting aside money so you can enjoy your golden years. But what about your health and healthcare? That’s where long-term care insurance (LTCI) comes in. This coverage helps older adults get the healthcare they need—without breaking the bank. But it’s something a lot of people don’t think about until they end up needing it. In fact, according to the Life Insurance Marketing and Research Association (LIMRA) only 3 percent of Americans 50 and older pay for some sort of long-term care (LTC) insurance plan, despite the fact that over 56 percent of people will need to use the service at some point in their life. But what exactly does the insurance policy do? And how much does it cost people who decided to enroll in it? We break it all down below.
What is long-term care insurance?
Long-term care insurance is a type of coverage that helps cover medical and nonmedical costs for people with a chronic illness or disability. It can include dressing, bathing, nursing home care and at-home healthcare—pricey services that are not usually not covered by Medicare.
“People in their 70s are often shocked to learn how different today’s long-term care landscape is from what they imagined,” explains Lily Vittayarukskul, CEO and founder of Waterlily—a company that helps prepare families for healthcare needs. “Most people assume their health insurance or Medicare will cover extended care needs, and it won’t because the program is not designed to do so. Medicare only steps in for short-term, rehabilitative care, not the custodial care most people actually need as they age,” she explains.
And it matters most for women, says Vittayarukskul. “Women live longer, outlive their partners and are more likely to be caregivers before they become care recipients. Knowing exactly what your policy can and cannot handle helps you plan for where gaps may show up, whether that means adjusting assets, updating your power of attorney or setting expectations with your family.”
How to qualify for long-term care insurance and how much does it cost?
To be approved for LTCI one must be healthy enough to be approved by an insurance underwriter. Normally people apply in their 50s or above and the cost of coverage for a policy with a $165,000 benefit ranges from $950 to $3,700 annually. That’s roughly $80 to $300 a month, depending on factors like age, health, lifestyle factors and coverage options.
Also of note: “Long-term care insurance rates and insurability are based both on your health and that of your parents,” says Jay Zigmont, PhD, CFP®, Founder of Childfree Trust. “If both of your parents had dementia, Alzheimer’s or similar cognitive decline, you may be uninsurable.”
And perhaps most important, he adds: “If you currently have long-term care insurance, you need to make sure it is paid on time. I jokingly tell clients that if money is tight they should pay their long-term care insurance premium before they pay their light bill. If you are late on electricity, you may be able to get help from the state, and it takes quite a bit of time before they shut it off. If you are a day late on your long-term care policy, they will cancel it.”
When is it too late to get long-term care insurance?
Technically, it’s never too late to get LTCI (though it will cost you), AARP warns that eligibility becomes very difficult after age 80. Thankfully, there are additional options, says Zigmont. “If you don’t qualify for stand alone long-term care insurance, you can look at long-term care annuities [a plan in which you pay one lump sum to an insurance company and they send you regular payments to cover your care], as they tend to be easier to qualify for. You can also look at getting care through a Continuing Care Retirement Community which may make it more affordable and accessible for you.”
