Traditional Long-Term Care Insurance

Traditional long-term care insurance is an insurance policy that pays for a variety of care services for those who cannot perform activities of daily living. The main services included would be in-home care, nursing home and assisted living. Typically, when two out of six Activities of Daily Living (ADLs) cannot be performed, that is when the policy would be triggered. The six ADLs are bathing, dressing, using the toilet, transferring to or from bed or chair, caring for incontinence, and eating.

Before policy issuance, there will be several factors that will determine both qualification for the policy and how much premium you will be required to pay. Age, health, marital status and tobacco use are the main points the carriers will look at. It’s important to look at multiple carriers, as they may have different risk profiles. Because of this, your premium quotes may vary.

Insurance companies have actuarial departments that are paid to determine the risk tolerance for that carrier. Older and unhealthy applicants equate to a higher probability of benefit triggers. Ultimately, that will cost the company more money. Although the policy is meant to care for those in need, one cannot ignore the business side of the coin. For example, there is a better chance of an insurance company profiting from someone paying into a policy at 50 years old, as opposed to 70. The 50-year-old would pay into the policy for a much longer amount of time if they both triggered benefits at age 75.

The frequency, also called the mode, of premium when choosing a policy can be flexible but will depend on the carrier.

The awareness of the need for such policies may develop over time or it may come in an instant. Either way, long-term care insurance can protect your interests when or if the need for such arises.

Sometimes, it is inevitable for those who need care to be transferred to a medical facility. Long-term care benefits can help them stay in their home longer than if they had no coverage. That will produce more time with family and friends while having their comfort be the main priority.

One of the main causes of stress today is financial. That is true in any age group or generation. Medically, stress can progress any ailments we have as it is not a healthy state to be in, especially over a long period of time. Having a policy in place, where covering the cost of care is planned for ahead of time, could ease the policyholder’s mind as well as reduce the burden of care for the family.

Families have been torn apart, had the financial assets of heirs depleted, and there have been physical tolls on the health of those who need to step in and care for loved ones, due to the need for long-term care. Having a plan in place can solve much more than just who takes care of yourself or your loved ones.

Traditional long-term care plans can protect any assets currently in place. Whether it’s retirement funds or another vehicle providing fixed income, those are typically the places funds are pulled from to pay for needed care. While most seniors are living on fixed incomes, a long-term care policy could protect those assets and needed monthly income.

Another benefit of traditional long-term care insurance is that it, on average, is less expensive than hybrid long-term care options.

With inflation being a strong part of the country’s financial woes, non-guaranteed premiums are not a favorable feature of traditional long-term care options. Premiums are not guaranteed to stay the same over time, which can produce obvious challenges. This is especially true when forecasting five to ten years into the future.

Although cheaper than Hybrid policies, at least to start, traditional long-term care options are expensive relative to other policies.

Any significant health issues currently active or in the past will be considered during the underwriting of the policy. The older an applicant is will also be taken into account. Both will produce higher premiums.

In the event of death, any unused benefits may not be able to be salvaged.

While there are many similarities between traditional and hybrid long-term care options, there are some differentiating factors that should be considered.

A great benefit to hybrid long-term care products is the addition of the life insurance component. This will ensure unused benefits can be salvaged for beneficiaries. While long-term care insurance costs can cut into the death benefit, some carriers ensure a guaranteed minimum death benefit.

As noted above, inflation is a high concern today. Hybrid long-term care insurance can guarantee your premiums will not go up. This is a great asset in preparing for one’s financial future.

As far as tax considerations go, talk to your trusted tax professional regarding this matter. That being said, there are some possible tax benefits to premiums paid, as the IRS does allow medical expenses to be deducted based on some qualification requirements. According to the IRS, the amount you can include for qualified long-term care insurance contracts depends on the age, as of the end of 2022, of the person for whom the premiums were paid.

There are several main tips we recommend for choosing a long-term care insurance policy.

First, find a trusted advisor. This can come in the form of an agent, broker or financial advisor. Make sure you are considering multiple carriers, as some may be a better fit for you.

Having a family meeting and understanding budgetary constraints. Consider current assets and fixed income, as they will play a part in the affordability of what are typically expensive policies.

Consider the duration of benefits, as well as optional additions or riders. Inflation protection may be a significant concern, as mentioned above. This is a common popular addition to long-term care policies of any kind.