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Is long-term care insurance a good bet?

Long-term care is needed when you can no longer take care of your own needs.

According to the Department of Health and Human Services, long-term care is a range of services and care that may be necessary to meet your daily living and personal care needs. The agency reports about 60% of the population will need help with things like dressing, making meals or seeing to their daily living needs.

Long-term care may be needed because of a chronic illness, old age, an accident or other medical problems like a stroke. To pay for the cost of long-term care, one can purchase long-term care insurance.

What exactly is long term care insurance?

Although policy activation rules vary from state to state, long-term care insurance is coverage to pay for costs associated with room, board, and any custodial care for services that help with activities of daily living.

“Before your long-term care policy can be used, you must not be able to perform three or more of these daily activities,” Lindsay Malzone,’s Medicare expert, tells FOX Business.


What does it cost?

Malzone says prices vary widely depending on several factors such as monthly benefit amount, inflation protection, elimination period and age.

“The price will be significantly lower if you buy the insurance when you are younger,” she says.

Another factor to keep in mind is that these insurance plans are underwritten.

“You have to be healthy enough to qualify for coverage with most insurers,” says Malzone. “Some companies will approve you with health issues, but the premium can be increased.”

That said, she reports the average cost for a 55-year-old can range between $950 and $1,500 per year. Depending on the policy choices and the other factors mentioned above, the policy may differ from the average provided, she says.


What would it cover?

Long-term care, Malzone says, covers non-medical costs associated with nursing homes or assisted living facilities. In addition to standard room and board costs, the funds can be used to provide assistance for daily activities such as:

– Bath

– Getting dressed

– Eat

– Incontinence care

– Toilet service (getting on or off the toilet)

– Transfer (getting in or out of a bed or a chair)

In addition, Malzone says that one of the most common chronic conditions that long-term care helps is individuals with Alzheimer’s disease or other forms of dementia.

“People with these illnesses need specialized care at facilities that handle their unique situations. People with chronic illnesses need to live in a place equipped to help them maintain their health and quality of life,” she says.

Why should it be bought?

Nursing homes and assisted living facilities are expensive. Malzone says the cost can range from $800 to $8,000 a month. These costs will vary depending on where the facility is located and the amenities it provides.

“Many seniors can’t afford to pay for assisted living on their Social Security, so they rely on family members or go it alone,” she says.

If you hold a long-term care policy, your benefits may cover the cost of some or all of your care.

What is the ideal age to buy it?

Malzone says to buy a term insurance policy as soon as you can budget for it and the cost is significantly less for younger individuals.

“Most individuals buy their long-term care insurance in their 50s,” says Malzone. “It’s because of a balance of being in good enough health to qualify and having enough income to budget.”

Once the policy is locked in, the premium cannot change based on age and health, she notes.


Long-term care and its realities

Chris Orestis, president of Retirement Genius, reports that 84% of people surveyed think the need for long-term care will never happen to them, but if it does, they will be able to afford it.

“The reality is that 70% of people over the age of 65 will need long-term care in their remaining lifetime,” he tells FOX Business. “Nothing will undermine someone’s financial security in retirement faster than the high cost of long-term care. One of the smartest steps a person can take to stave off disaster caused by the loss of being able to live longer independently, is to have long-term care insurance.”

Orestis says there are three important things to understand about long-term care insurance:

The younger and healthier you are when you buy a policy, the more affordable it will be.

“If you can get a policy through your employer, you should sign up immediately to get it at a very low cost without any underwriting, and if you leave your employer, you can keep the policy and take it with you,” said Orestis.

People make the mistake of thinking Medicare provides long-term care coverage, and it doesn’t.

“Medicaid will provide coverage, but to qualify your total assets and income must be below the poverty level. Paying out of pocket for care can easily cost $10,000 a month and can quickly bankrupt a family,” he says.

People who have long-term care insurance are considered “private pay” and are more desirable to care providers than people who don’t have the coverage and/or are on Medicaid, Orestis says.

“The reality is that if they can only take one person, they’re going to take the person with long-term insurance over the person on Medicaid every time,” he says.

If you also pay privately, Orestis says you can decide what kind of care you want and where you will receive it, such as staying at home. If you’re on Medicaid, you’re no longer able to make those decisions and will almost certainly end up in a nursing home sharing a room with one or two other people, he says.

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