Long-term care insurance is a type of coverage that provides for the cost of long-term care beyond a predetermined period. Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid. It’s designed to cover long-term services including personal and custodial care in a variety of settings such as your home, a community organization, or other facility.
Individuals who require long-term care are generally not sick in the traditional sense but are unable to perform two of the six activities of daily living (ADLs) such as dressing, bathing, eating, toileting, continence, transferring (getting in and out of a bed or chair), and walking. Age is not a determining factor in needing long-term care. About 70 percent of individuals over 65 will require at least some type of long-term care services during their lifetime. More than 40 percent will need care in a nursing home for some period.
Understanding Long-Term Care Insurance
Long-term care insurance policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with activities of daily living such as bathing, dressing, or eating. You can select a range of care options and benefits that allow you to get the services you need, where you need them.
The cost of your long-term care policy is based on the type and amount of services you choose to cover, your age when you buy the policy, and any optional benefits you choose such as benefits that increase with inflation. If you are in poor health or already receiving long-term care services, you may not qualify for long-term care insurance as most individual policies require medical underwriting. In some cases, you may be able to buy a limited amount of coverage, or coverage at a higher “non-standard” rate. Some group policies do not require underwriting.
Types of Policies
There are several different types of long-term care insurance policies available, each with its own set of benefits and drawbacks. The most common types are traditional long-term care insurance, partnership policies, and life insurance policies with long-term care riders.
Traditional long-term care insurance policies are the most common type. They offer the most comprehensive coverage, but they are also the most expensive. Partnership policies are similar to traditional policies, but they have a special provision that allows you to protect a certain amount of your assets if you ever need to apply for Medicaid. Life insurance policies with long-term care riders are a newer option. They allow you to access your death benefit early to pay for long-term care costs.
Benefits and Drawbacks
Long-term care insurance has several benefits. The most obvious is that it can help cover the high costs of long-term care. Without insurance, these costs can quickly deplete your savings. Long-term care insurance can also give you more choice in your care. If you have insurance, you may be able to afford to stay in your home longer or choose a more expensive care facility.
However, long-term care insurance also has some drawbacks. The premiums can be high, especially if you wait until you are older to buy a policy. There is also the risk that you will pay premiums for years and never need to use the insurance. Additionally, some people may not qualify for long-term care insurance due to health reasons.
Role of Financial Advisors
Financial advisors play a crucial role in helping individuals understand and navigate the complexities of long-term care insurance. They can provide valuable advice on whether long-term care insurance is a good fit for an individual’s financial situation and healthcare needs.
Advisors can also help compare different policies and providers, ensuring that individuals get the best coverage for their needs. Additionally, they can provide guidance on how to incorporate the cost of long-term care insurance into an overall financial plan.
Assessing the Need for Long-Term Care Insurance
One of the key roles of a financial advisor in relation to long-term care insurance is assessing whether an individual needs this type of coverage. This involves a detailed analysis of the individual’s health status, family history, and financial resources. If an individual has a high risk of needing long-term care and lacks the financial resources to cover these costs out-of-pocket, long-term care insurance may be a good option.
However, if an individual has significant financial resources, they may be able to self-insure against the risk of needing long-term care. In this case, the financial advisor might recommend against purchasing long-term care insurance. Alternatively, if an individual has a low risk of needing long-term care, the advisor might also recommend against this type of insurance.
Comparing Policies and Providers
Another important role of financial advisors is helping individuals compare different long-term care insurance policies and providers. This involves analyzing the benefits, coverage limits, exclusions, and costs of different policies. It also involves evaluating the financial strength and reputation of different insurance providers.
Financial advisors can provide valuable insights into the fine print of long-term care insurance policies, helping individuals avoid policies with overly restrictive conditions or hidden costs. They can also help individuals find policies that provide the right balance of cost and coverage.
Conclusion
Long-term care insurance is a complex product that requires careful consideration and expert advice. It can provide valuable protection against the high costs of long-term care, but it is not the right choice for everyone.
Financial advisors play a crucial role in helping individuals understand and navigate the complexities of long-term care insurance. They can provide valuable advice on whether this type of insurance is a good fit, help compare different policies and providers, and provide guidance on how to incorporate the cost of this insurance into an overall financial plan.
