Benefits of Long-Term Care Insurance

June 9, 2021

In our “Overview on Elderly Care” blog we explored the special needs, legal support, and costs associated with eldercare services. The assistance most commonly addressed include assisted living, adult daycare, long-term care (LTC), palliative or hospice care, nursing homes (residential care), and home care. It’s estimated that 3 out of 4 seniors will require some form of long-term care during their lifetime. Unfortunately, the costs of these services have increased significantly over the past few years; also, as we age the expense only increases. A potential solution to help your family and you cover the costs of eldercare is through an insurance policy for long-term care. 

Traditionally, loved one’s provide elderly care services without payment; however, these family members can experience physical and emotional stress. Additionally, these individuals can potentially lose work or incur out-of-pocket expenses while providing support. To avoid this strain on family resources, consider a long-term insurance policy to pay for the cost of elderly care services.  

Estimated Elderly Care Costs

The U.S. Department of Health and Human Services (HHS) lists the national average expense for a health aide in 2021 at $20.50 per hour. The actual cost of services will depend upon your state and level of care required. 

Care Facility Costs per HHS – prices vary depending upon your location:

  • Semi-private room in a nursing home averages $6,844 a month
  • One-bedroom unit in an assisted living facility averages $3,628 a month

Medicare and Medicaid

Medicare is the federal health insurance program for people aged 65 or older. This program does not provide long-term care coverage. Conversely, Medicaid is a joint federal and state public insurance program that provides health coverage to low-income families and individuals. This program does provide long-term care coverage upon validation of insufficient funds. The U.S. government requires all states to provide certain healthcare services; additionally, states can offer supplemental benefits as they desire. 

Long-Term Care Insurance 

As most health insurance programs don’t cover elderly care, a private insurance, comprehensive long-term care policy can be purchased. These policies can cover some skilled nursing care and custodial care at home, an assisted living facility, or at a nursing home. To benefit from a long-term care policy, you must purchase the policy before you need assistance. Be forewarned, these policies can be expensive and carry large annual premiums. Couples can take advantage of some cost savings by purchasing a long-term insurance policy together. 

If you don’t have the funds to purchase a long-term care policy, or can validate your low-income status, Medicaid will provide assistance. In this situation you don’t need to purchase long-term care insurance. 

The Costs

As you increase in age, so do the rates for long-term care insurance. Depending on your age and state, some tax deductions may be available. 

  • 55 yr old couple should expect to pay approximately $2,500 per year in premiums.
  • 60 yr old couple could pay $3,500 per year.
  • 65 yr old couple would pay an estimated $7,000 per year.
  • 70 yr old couple should expect nearly $14,000 per year.

When you purchase a long-term care insurance policy, you should anticipate a 3% annual increase in the benefit amount. Most insurers pass along this increase to policyholders to cover inflation and the future cost of care. Your premium rates may increase annually as well. 

Insurance Coverage

A long-term care policy will cover most expenses for treating chronic illnesses and other ailments associated with old age. As an example, Alzheimer’s patients can receive at-home care, or nursing home funds for individuals unable to live unassisted. Long-term care insurance will also provide assistance to pay for home health care, homemaker services, and memory facilities. However, these policies will not pay for surgeries, doctor visits, or prescription drugs. Traditional health insurance or, if age applicable, Medicare will cover such expenses. 

According to the American Association of Retired Persons (AARP), nearly 70 percent of people 65 and older will require some type of long-term care. The average person will need 3 years of assistance. Here’s a link to a very helpful AARP article “Understanding Long-Term Care Insurance.”

The Upshot

In most situations eldercare costs are not covered by health insurance programs. Medicare can cover some services when they are deemed medically necessary, such as a part-time in-home health aide or limited skilled nursing care; however, services like custodial and personal care (help with bathing, dressing, grocery shopping or laundry) are not typically granted. As such you should potentially consider long-term care insurance to address your future needs. If you purchase a policy, don’t forget to upload the documents to the HereToday Vault

When deciding on a long-term care insurance policy consult with a financial advisor to help select the best option for your needs. 


Disclaimer. HereToday is not a legal service. This content should not be taken as legal advice. Before drafting any legal document, please consult an attorney.

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