Long Term Care Insurance: Who Needs It and Who Doesn’t?


Millions of baby boomers are wondering how to prepare for the possibility of needing costly care someday.

You need to understand that the rising cost of both care and the insurance that pays for it is only one piece of the puzzle.

New types of insurance give you more options. Also, recent research calls into question how common lengthy nursing-home stays really are further muddying the odds of needing coverage.

Add this to the fact that insurers badly miscalculated how many policyholders would make claims, leading to a mass exodus of big players from the business in recent years.

So do you need long-term-care insurance?

The answer to this is a difficult and personal one. This article will help you think through that tough decision.

What Long Term Care Insurance Promises

Long term care is something you hope you will never need and really never want to think about. A lot of people hope that when and if they aren't entirely self-sufficient, a spouse or another family member can pitch in.

But what happens when you need more of a hand with daily activities than a lay helper can provide? Or what if you need around-the-clock or more expert medical care?

In this situation, you'll have to pay for a professional.

Even a shared room in a nursing home is expensive – averaging more than $77k a year. That cost can be even higher depending on the state you live in. Assisted living -where you get just some one-on-one help and basic medical care is only nominally better.

Medicare covers 100 days in a nursing home if you are recovering from an illness or injury and showing improvement, but it offers no help at assisted living or in your home.

Medicaid will pay for a nursing home and some in-home help only after you have all but exhausted your savings. Depending on the state the program can help with assisted living as well.

This is where long term care insurance comes in.

Long term care insurance reimburses you for at least a portion of the cost of a nursing home, assisted-living facility, adult day care, or in-home help. To qualify for benefits, you must be unable to perform two of these six day-to-day activities

  • Bathing
  • Dressing
  • Moving from your bed to a chair
  • Using the toilet
  • Eating
  • maintaining continence

In addition, a medical professional must expect your disability to last at least 90 days.

Are You A Candidate For Long Term Care Insurance?

While you may decide to try to fund your care out of your savings, it makes sense to at least research your options for peace of mind.

Here’s how to do the research.

Evaluate Your Worth

In general, you should consider long term care insurance if you have between $200k and $2 million in assets. If you have less than that, the premiums are difficult and there is not enough to protect.

Medicaid will cover most of the costs of care after you reduce your savings to as little as $2,000 if you're single.

If you have $2 million in assets, you can reasonably plan on paying your own way. But as in all things the general rule isn't always clear cut.

Comprehend The Odds.

You may have heard figures that make rolling the dice seem like a foolish bet.

One frequently cited stat is that 70% of Americans who reach 65 will eventually need some sort of long-term care.

But recent information from the Center for Retirement Research paints a less alarming picture.  While a high number of people will need nursing-home care at or after 65, but only a small portion will remain long enough to run up big bills.

The Center for Retirement Research state that half of men and 39% of women stay less than 90 days, before most long-term-care policies even kick in and the average stay for a man is less than a year; for a woman, a year and a half.

Previous studies estimated that a long-term-care policy made financial sense for 30% to 40% of 65-year-olds. The CRR pegged that number around 20%.

What Exactly Are You Insuring?

Long term care insurance is really about protecting your estate and preserving your legacy.

Without long-term care coverage, you'll still get that care but it will be funded by savings and Medicaid, if needed. If you pay for your care, it could deny your children an inheritance.

Check If You Can Even Get Insurance

In recent years, insurers have stepped up medical screening. Overall, 30% to 40% of applicants are turned down for health reasons and your chances are better when you're younger.

If you consider long-term medical care when you are younger consider that even 17% of 50- to 59-year-olds are disqualified. Common reasons include chronic health problems like diabetes and arthritis, or any condition that can leave you incapacitated.

Unfortunately, if you get a denial from one insurer, it will often lead to automatic denials from others.

Research Your Heredity

It's not just your health that counts insurers have also been considering your parents' health when you apply for a policy. You might not qualify for the best rate if you have early-onset dementia or coronary artery disease in the family.

Take your family history into consideration. Half of all claims are triggered by care associated with dementia.

Insurers may argue for less or no coverage if there is a history of cancer. This is because patients usually have a decent quality of life until just a few months from the end. While you might think that is a little cold, it’s something you shouldn't ignore.

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