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You’d think health insurance would cover all your medical costs in your senior years. Unfortunately it’s not quite that simple. Getting older often requires specific types of medical care, and without long-term care insurance millions of seniors can find themselves without insurance options to cover the bills.
Long-term care insurance pays for the costs of a nursing home and other kinds of elder care that seniors need, such as in-home nursing care.
Long-term care insurance covers the costs associated with treating chronic illnesses or other ailments in old age, such as at-home care for Alzheimer’s patients or nursing home costs for people unable to live alone. In addition to nursing home costs LTC covers home health care, homemaker services, respite care and memory facilities.
It does not cover costs of surgeries, prescription drugs and doctors’ visits—those are covered by health insurance, or Medicare in the case of most seniors.
An estimated 3 out of 4 seniors will need some form of long-term care. But to understand who needs long-term care insurance, you first need to understand a couple things about Medicare and Medicaid:
Medicare is health insurance automatically granted to all Americans 65 or older. It does not cover long-term care costs. Medicaid is health insurance given primarily to poorer Americans. It does cover long-term care, but only if you’re broke.
If you’re thinking you can just give your kids your money when the time comes and qualify for Medicaid, think again. Here’s a full explainer on how your finances affect nursing home options, but the short version is that you can’t offload your money and qualify for Medicaid unless you did it more than 5 years ago.
Nursing homes can be incredibly expensive—while nationwide averages hover just over $200 per day, they can easily run to $400 per day depending on your area. That’s anywhere from $75,000 - $150,000 per year. A 5-year stay in a nursing home can easily cost over $750,000.
Long-term care insurance is worth considering for people with savings who don’t want to spend that much on elder care in their senior years.
Couples are at an advantage if they’re buying long-term care insurance together, as a policy that covers both spouses is only moderately more expensive than buying an individual policy.
If you’re broke and think you may always be, bummer. But the good news is, if you need long-term care Medicaid will cover you. There’s no need to consider long-term care insurance.
Long-term care insurance costs increase dramatically as you get older. If you haven’t bought it by the time you’re 60, it may become unaffordable.
For instance, a 55-year-old couple can expect to pay about $2,500 per year in annual premiums for long-term care insurance. A 60-year-old couple would pay $3,500, but by 65 it would cost $7,000 and by 70 it would likely cost $14,000 or more per year. Some tax deductions may be available depending on your age and state.
Most long-term care care insurance includes a 3% annual increase in the benefit amount to keep pace with inflation so they can cover the cost of care in the future, not just today. But the benefit amount is still fixed—if you need specialized care for a long time, your policy may not cover it all. Also keep in mind premium rates may increase annually as well. A 55-year-old couple who pays $2,500 premium in their first year with the policy may end up paying much more by the time they’re 60.
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Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
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