How Long-Term Care Insurance Normally Works Ep. 85

Did you also know that the age of those requiring long-term care is actually decreasing? The stats shared in this newsletter are taken from Genworth.

In 2010, 81% of care recipients were 65 or older. In 2018, 57% of care recipients were 65 or older. So, younger people are needing long-term care.

Remember, that Medicare will only pay 100% of the cost at a skilled nursing facility for 20 days. Also noteworthy, 21% of people require long-term care after an accident.

The need for knowledge about this subject is only going to increase. By 2030, one billion people worldwide will be over 65. And until 2030, ten thousand Baby Boomers will turn 65 each day. 70% of individuals will need long-term care in their life-time. On average, people that need long-term care will need it for three years.

What do we do with this knowledge? Let’s start with what has historically been done.

Someone may learn the above information and say, "I want a long-term care policy." Here’s how they generally work: the person may think to themselves, “Well, if I need help and I need the most help, I guess that would be about $8,821 per month. So, I’d like a policy that will pay that amount.” 

Then they may choose to have a 30-day elimination period. What this means is 30 days after you needed care, the policy will begin paying you. Sometimes they may add an inflation provision. It's common for people to experience sticker shock when they figure out how much their coverage will cost. 

If the person can could afford the coverage, I’ve generally found that they probably started it in their 40s or 50s. So, the insurance company knew they would be paying for it for many years before they actually used it.

Each year the price may change for the policy, and if the insurance company that issued the policy found a lot of people in a certain state were needing the policy to payout, they may seek to increase the rates. I’ve talked with numerous people who saw their rates sore.

If the person in the above example could not afford it or was unwilling to pay for the above scenario, they may lower the monthly amount the policy will pay and increase the elimination period to 60, 90, or even 180 days.

But here’s the kicker. It's like your home or auto insurance. If you never use it, you normally lose it and all the money you put into it is gone. Sometimes you can pay extra for a return of a premium provision that will return your money if you don't use  the benefit. This may increase the cost and may make it less palatable.

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