Long-Term Care Insurance for Aging Parents
Long-term care insurance can be, and often is, bought for aging parents. Buying a policy for them can help ensure they’ll receive the care they require without draining their savings or yours. Explore the types of policies available and learn the factors to consider when choosing the right policy for your parents.
- Written by Eric Estevez
Owner of HLC Insurance Broker, LLC
Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses.Read More
- Edited BySavannah Pittle
Senior Financial Editor
Savannah Pittle is a professional writer and content editor with over 16 years of professional experience across multiple industries. She has ghostwritten for entrepreneurs and industry leaders and been published in mediums such as The Huffington Post, Southern Living and Interior Appeal Magazine.Read More
- Reviewed ByDaniel J. Adams, MBA, CFP®, CLU®
Daniel J. Adams, MBA, CFP®, CLU®
Certified Financial Planner™ Professional and Independent Insurance Agent
Daniel J. Adams, the founder of CEG Life Insurance Services, boasts extensive expertise in life and health insurance products. His role as a Certified Financial Planner™ professional and independent insurance agent allows him to aid clients in establishing a solid financial future. Moreover, he takes on the responsibility of training new agents and offering guidance to other financial professionals.Read More
- Published: October 24, 2023
- Updated: October 25, 2023
- 6 min read time
- This page features 2 Cited Research Articles
- Edited By
- Long-term care insurance can provide financial protection and peace of mind for your family.
- The typical age range to buy these products is 50 to 70. Start the conversation about long-term care insurance early to find the best coverage and rates.
- The cost of long-term care insurance varies based on factors like age, health status and the type of coverage you select.
- Easing the burden of care, both financially and physically, should be a high priority.
- Seek the advice of lawyers and other professional advisors while making this decision.
Can You Buy Long-Term Care Insurance for Your Parents?
The short answer is yes, you can buy long-term care insurance for your parents. However, it’s important to involve them in the process as their health history and signatures will be required.
The person making the premium payments would be listed as the payor, and the policy would be in the parent’s name. Typically, the person who is insured under the policy (in this case, your parents) is responsible for paying the premiums. If you plan to pay the premiums on behalf of your parents, you’ll need to discuss and agree on this arrangement.
Make this distinction when writing the policy for several reasons. First, it correctly depicts who is the insured and who is the payor. This can be crucial in the case of any legalities that may come up with the insured and the carrier.
If qualified for tax deductions, it will also serve as proper documentation for your tax return files. Please discuss with your trusted tax professional to determine whether your policy is tax-deductible. They can review Topic No. 502, Medical and Dental Expenses with you, as this is where the IRS notes the deductibility of premiums.
To protect against the emotional, physical and financial burden of taking care of parents in their old age, you should make sure to have a conversation with them about their need for long term care insurance.
When Should You Consider Long-Term Care Insurance for Your Parents?
Long-term care should absolutely be considered for your parents, especially as they get into the 50-, 60- or 70-year-old range. The younger, the better, as premiums will only increase with time.
As in any financial plan, it’s wiser to plan ahead than wait. Waiting can cost you money or rush you into a bad decision. Waiting is also running the risk of your parents running into a health problem that will produce a denial of their long-term care application. In other words, they may become uninsurable.
- Age of Aging Parent
- The age of your parents is going to directly affect the premium quoted to them. The initial cost of premiums quoted will be more expensive in each passing year. The sooner you buy the policy, the more affordable it will be.
- Health Status of Aging Parent
- Health history and current health status will be scrutinized by the insurance carrier's underwriting department with each submitted application. A riddled health history will increase the cost of a policy, without question. If insurance carriers pay out more claims than reasonably estimated, it can be bad news for the business. That scenario put insurance companies out of business, leaving policyholders with a new acquiring company or scrambling to find a new carrier.
- Types of Care Required
- Be sure to choose a carrier that covers diverse areas of care. It’s unrealistic to predict what type of care parents may need in the future, and you don’t want to let hard-earned assets go to waste. Type of care to consider in your research amongst others would be nursing home, assisted living and in-home care. While current lifestyle can be a good indicator, we cannot truly understand what life holds in store for us.
- The Provider’s Reputation
- Reputation goes a long way when considering a long-term care carrier. Factor in a company's financial strength, as well as any reputation of untimely payments. One way to measure financial strength is to find the company’s AM Best rating. These are readily available online with a quick search. Consulting an industry professional for the experience they have had with clientele is some of the most credible intel you can find. You might ask about timely claim payments and customer service reliability. These are two underrated factors that can really justify the premium paid.
What Kind of Long-Term Care Insurance Makes Sense for Your Parents?
In order to answer this question, you’ll have to understand your parents’ values and desires after and near death. While this may be a difficult conversation, it’s important to consider whether they would like a life insurance component to the policy. If so, a hybrid product would be the way to go. Otherwise, they should go with a traditional long-term care policy.
Traditional long-term care policies typically have a defined period where only long-term benefits will be paid. Hybrid, or linked benefit, policies will have death benefits available if not exhausted by policyholders while they were alive.
The type of long-term care insurance you ultimately choose should be determined by your own research and consultative conversations with trusted advisors. These advisors should ideally include an estate planning attorney, CPA, insurance broker or financial advisor.
How Much Does It Cost to Buy Long-Term Care Insurance for a Parent?
Budgetary constraints are critical to the total benefit of your chosen policy. If money is the main driver in the decision, traditional long-term care products may be your best bet. While premiums are cheaper, you should know that premiums are not guaranteed. Although hybrid policies will be more expensive, premiums are fixed for life and easier to forecast when discussing what life will be like five to 10 years down the road.
The assets and monthly budget of the proposed insured will be highly influential in the decision-making process. While these products can be paid monthly, there are also quarterly, annual, 10-pay, 20-pay or even single premium payment plans.
Alternatives to Long-Term Care Insurance for Aging Parents
There are two main alternatives to traditional or hybrid long-term care insurance: long-term care (LTC) riders and chronic illness riders.
Chronic illness riders are an acceleration of the death benefit and are typically used for non-terminal ailments. A long-term care rider is an additional option added to a life insurance policy that typically comes in the form of a percentage of the death benefit.
For example, let’s assume there is a policy with a death benefit of $100,000 with a 2% LTC rider. This would indicate the policy can pay $2,000 monthly until the death benefit is exhausted. That would last a little over four years. Be mindful that benefits may not begin until after an elimination period has passed, usually that of 90 days. These features change from carrier to carrier.
When talking to your insurance advisor, know that they will need a health license to include an LTC rider.
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2 Cited Research Articles
- Lo, A. (2023, February 7). Caring for Aging Parents Takes Planning Ahead and Patience. Retrieved from https://www.kiplinger.com/retirement/caring-for-aging-parents-takes-planning-and-patience
- U.S. Internal Revenue Service. (2019). Topic No. 502, Medical and Dental Expenses. Retrieved from https://www.irs.gov/taxtopics/tc502