Long term care (LTC) insurance offers protection to those who suddenly find themselves ill and in need of expensive, extended medical care. While LTC insurance can offset the cost of escalating medical bills, it may or may not be a good investment for you and your family. Before you decide to purchase a policy, it’s wise to do your due diligence to figure out if it makes fiscal sense for you to secure LTC insurance before a medical emergency strikes.
The Difference Between Health Insurance and Long Term Care Insurance
It’s important to understand the difference between a regular health insurance policy and a LTC insurance policy.
LTC insurance policies are designed specifically to cover the costs of medical and nursing assistance for those suffering from a long-term illness or chronic condition. Expenses associated with long-term nursing care or professional aide assistance to help the afflicted individual navigate the activities of daily living, such as eating or bathing, are covered under LTC insurance policies. Many policies cover in-home care, as well as assisted living facilities or nursing home expenses. Some policies get more specific and limit coverage to only those facilities which are licensed. In instances where long-term care is required, an LTC insurance policy can greatly ease your financial burden and prevent you from having to pay medical bills completely out-of-pocket.
The biggest difference between Medicare or health insurance policies and LTC insurance policies lies in the name, itself. LTC insurance generally kicks in only when an illness is deemed to have long-term effects. Medicare and health insurance policies generally cover the types of medical expenses outlined above only if they’re temporary — that is, for the duration of an illness that continues to improve with time (for example, recovery from surgery or a stroke). This type of insurance mainly ends once you have shown signs of reaching a limit in your healing and you are unlikely to improve further. If you are left with residual health issues, this is the time where LTC insurance can kick in.
However, LTC insurance doesn’t come cheaply and can run many thousands of dollars in premium payments, each year, so before you purchase a policy, you would do well to analyze the cost of the policy’s premiums against your potential outlay of cash against future LTC costs.
Weighing the Factors
Contributing factors such as net worth and estate planning goals will impact the decision you make about whether or not LTC insurance is a sensible investment for you. If you have set aside substantial savings and have acquired a healthy amount in investments, you may opt to use these means, should a long term medical situation arise versus paying the accumulating premiums for insurance you may never need.
Those who have amassed less of a nest egg and who wish to leave what they have accrued for their heirs may choose to purchase LTC insurance if the premiums are reasonable. Premiums tend to escalate as you age so if you decide to purchase LTC insurance, the younger you are when you make that decision, the lower your premiums will be. Purchasing LTC insurance while you’re younger is also beneficial in that your chances of developing health conditions as you age can increase and impact your eligibility. As with life insurance or other types of medical insurance, those with pre-existing conditions may not be able to obtain LTC insurance or may have to pay more significant costs, if they are approved.
While buying earlier in life may seem like a better idea, you must keep in mind that you’ll potentially be paying premiums over a much longer period and take that into account. You might be able reduce your premium costs by choosing a shorter benefit period or a longer elimination period.
When it comes to determining whether or not LTC insurance is a good tool to add to your financial tool kit, you should gather as much information as possible and analyze the pros and cons before making a final decision. Contact your Untracht Early advisor for more information.