Is Long-Term Care Insurance More Expensive for Older Adults?

Most seniors have health insurance coverage through Medicare, private insurance or a combination of the two. However, long-term care insurance isn’t always on older Americans’ radars. There are currently 811,500 adults in assisted living facilities and 1,347,600 in nursing homes in the United States. At some point, you or a loved one may need long-term care, and it could require more financial resources than you have available.

Financial planning experts recommend that people should begin looking for long-term care policies at age 55 to 60. Taking out a policy sooner may give you a lower monthly premium, but you will need to pay for it longer, canceling out the lower rate. Depending on the type of help needed, long-term care can be prohibitively expensive. The peace of mind for the future is worth the investment in planning for needs in later life. This article explains what long-term care insurance is, at what age you should purchase it, and how to find the best policy for their situation.

What Is Long-Term Care?

Illness or disability can lead to the need for long-term care, and seniors are especially vulnerable to both. Long-term care consists of help with the activities of daily life, such as bathing, dressing and preparing meals, and can also include companionship and transportation. People with chronic medical conditions, frailty, disabilities or dementia often require 24-hour assistance. Family members can sometimes provide this care, but many people don’t have that resource.

The Cost of Long-Term Care

Below are the most recent averages for the monthly cost of long-term care in the United States, according to the 2021 Genworth Cost of Care Survey.

• Home Care Assistant: $4,957
• Home Health Aide: $5,148
• Adult Day Care: $1,690
• Assisted Living: $4,500
• Nursing Home (semi-private room): $7,908

How Much Does Long-Term Care Insurance Cost?

The percentage of people aged 65 and over in the United States rose from 12.4% in 2000 to 16.5% in 2020. The demand for long-term care and its costs have risen proportionally. As people age, their health becomes less robust, and they’re more at risk for falls and other types of injuries. Medical conditions may also arise or worsen, leading to the need for around the clock care. The cost of long-term care is beyond the means of many people, and in some cases, it can lead to the loss of the family home and a lifetime of savings.The American Association for Long-Term Care Insurance estimates annual long-term care premiums to be between $1,242 and $3,247 for a policy that pays out for two years. The rate varies according to gender, marital status and the policyholder’s age when purchasing the insurance.

Estimated Annual Cost of Long-Term Care Insurance – 2-Year Policy

This policy pays a maximum of $200 per day up to a total maximum payout of $146,000 if used for the full two years. This is a good value if the senior ends up needing it. Below is a chart of the long-term care premiums that would be paid over a one to five-year span.

Estimated Cost of Long-Term Care Insurance Premiums

Factors That Affect the Cost of Long-Term Care Insurance

The cost of long-term care insurance depends partly on your age and health and the type of policy you buy. The monthly premium cost rises for each year you delay the long-term care insurance. Each person has to consider variables such as their health, family history of illness and financial means when deciding whether to take out a policy. Waiting to take out insurance until age 60 may make sense for cost considerations. However, once a senior develops a chronic condition, the cost of long-term care insurance will rise.

The type of coverage also makes a difference in the monthly cost. Seniors can choose to pay for basic or comprehensive coverage, or something in between. Each policy pays a fixed amount daily or monthly, up to the full value of the policy or for a set number of years. Policies are available that raise benefits according to an increased cost of living, but they are more expensive.

What Does Long-Term Care Insurance Cover?

Long-term care insurance benefits depend on the type and length of coverage, as well as insurer limits on coverage for preexisting conditions. For example, alcoholism and a policy may not cover drug addiction, and other preexisting conditions such as heart disease may require a waiting period before benefits are available. Generally, long-term care insurance begins paying out when a person is diagnosed with dementia or can no longer perform basic daily activities without assistance. Eventually, 60% of adults will need help with activities such as dressing, eating and getting in and out of bed.

Factors to consider include whether insurance companies waive premiums once benefits start and if a policy covers transportation. It’s important to be sure you can afford the insurance long-term because coverage stops if you miss payments. A hybrid long-term care insurance plan may also be attached to a life insurance policy. This type of plan includes life insurance that will be paid to heirs if they don’t use long-term care benefits, but the amount will be less than it would be without the attached insurance.

The Best Way To Buy Long-Term Care Insurance

For seniors who own a home and have savings and investments to protect, long-term care insurance can be a valuable safety net. The expense of long-term care can drain financial assets quickly, and a long-term care policy can help prevent this from happening. The National Association of Insurance Commissioners recommends checking with several insurance providers before buying a policy, and it provides a comprehensive checklist for seniors to use when evaluating insurers.

The type of care covered by the insurance is another vital element. For example, some policies may include respite care, adult day care and hospice care. Below are the basic forms of long-term care that a long-term care policy should include.

Home-Based Care

A paid companion or a home health care aide can provide this care, and it may include nurse visits, depending on the health of the person receiving care. Medicare pays for home therapy and nursing visits on a short-term basis when a person is recovering from hospitalization or injury. Long-term care insurance will take over if needed once the policyholder has exhausted their Medicare benefits.

Nursing Home

Medicare may cover the cost of skilled nursing care in a licensed facility, but for seniors who only need help with regular daily activities such as eating and bathing, there is no benefit. Most policies will only pay the portion of the cost that Medicare doesn’t cover, up to the daily maximum benefit.

Assisted Living

Older adults who need help with the activities of daily life can also receive the care they need at an assisted living facility. The cost of assisted living is less than nursing home care and home health care and a long-term care insurance plan should include it.

Checklist for Further Research

Research these factors when looking for a long-term care insurance policy, and it should be possible to find one that fits your unique circumstances. Checklists from government websites help consumers compare the benefits of each policy in detail. Below are some starting points to consider when beginning your search:

• Cost of policy
• Term of coverage
• Daily maximum benefit
• Lifetime benefit
• Allowable types of care
• Coverage exemptions