Traditional Long Term Care
Traditional Long Term Care
There’s two types of long-term care insurance:
- Traditional Policies
- Hybrid Long Term Care Policies
They both are good options. But which one is best for you depends on your needs.
This article will focus on Traditional Policies.
Benefits
With traditional Long-Term Care, you choose your benefits when you apply. This includes:
- Monthly Benefit
- Benefit Period
- Inflation Protection
- Waiting Period
Monthly Benefit
This is how much the policy will pay each month that you need coverage. Typical amounts range from $3,000 per month up to $12,000 per month.
Benefit Period
This is how long the coverage lasts. The minimum is 2 years. Most companies have a maximum benefit period of 6 years.
Inflation Protection
Inflation protection increases your monthly benefit over time. Inflation protection is not required. If you decide to add it, then it increases your monthly benefit each year you have the policy.
Common options are between 3% and 5% benefit increases every year.
Waiting Period
Most policies have a waiting period before your coverage starts. The minimum waiting period is typically 30 days. But a 90-day waiting period is the most common.
Personalized Options
Each policy can be created uniquely for you. Budget and health are 2 big factors when creating a plan.
Premiums
After you are approved, your coverage is guaranteed renewable. This means the insurance company cannot cancel you as long as you pay your premium.
It’s important to note that your premium is NOT guaranteed. The insurance company can file a rate increase with the state if needed. So your premium can change over time.
But as long as you continue to pay your premium, your coverage will stay active.
What happens if I don’t need care?
Statistics show about 70% of people will need care during their lives. But what if you are part of that 30% that doesn’t need any care?
You pay your premium and hope you don’t need to use the coverage. If you don’t have to file a claim, then you don’t receive any benefits.
There’s no return of premium, refunds, or cash value in the policy.
Quote example
Here’s a few examples for people that are 65 years old looking for long term care solutions. Typically, Long Term Care premiums are based on your age when you buy the plan. So a 60 year old buying long term care would pay less than a 75 year old buying long term care.
Example 1 – 65-year-old single woman
One traditional coverage option would be:
- $6,000 monthly benefit
- Maximum benefit period of 5 years
- 90 day waiting period before coverage starts
- The premium for this coverage is $4,842 per year.
This policy will pay out up to $6,000 a month every month for up to 5 years. That’s a total potential benefit of $360,000.
If you pass away without needing care, then the policy would end. No money is refunded or paid out by the policy.
Example 2 – 65-year-old single man
One traditional coverage option would be:
- $6,000 monthly benefit
- Maximum benefit period of 5 years
- 90 day waiting period before coverage starts
- The premium for this coverage is $2,801 per year.
This policy will pay out up to $6,000 a month every month for up to 5 years. That’s a total potential benefit of $360,000.
If you pass away without needing care, then the policy would end. No money is refunded or paid out by the policy.
Example 3 – 65-year-old married couple
One traditional coverage option would be:
- $6,000 monthly benefit each
- Maximum benefit period of 5 years
- 90 day waiting period before coverage starts
- The premium for this coverage is $6,497 per year.
This policy will pay out up to $6,000 a month every month for up to 5 years for each of you. That’s a total potential benefit of $720,000.
If you pass away without needing care, then the policy would end. No money is refunded or paid out by the policy.
Benefit Example
This policy can be used many ways but here’s 3 specific examples. Let’s stay with a $6,000 monthly benefit.
Home Health Aide
A person is no longer able to live at home independently. This type of policy could pay for a Home Health Aide to come to your house. So that you can stay home.
It’s common for home health aides to be there to help for 40 hours per week. The national average cost for a full-time home health aid is $6,292/month.
The Long-Term Care policy will pay $6,000/month for that Home Health Aide.
Assisted Living Facility
I had a client have a stroke at 67 years old. Very healthy and it came out of nowhere. She’s capable but no long able to live independently.
Assisted living is about $5,300/month.
The Long-Term Care policy will pay that Assisted Living Facility bill each month.
Nursing Home
If it’s a situation where you need around the clock care, then a nursing home is the typical location for care.
The national average for a nursing home is $8,669/month.
The Long-Term Care policy will pay $6,000/month toward the Skilled Nursing Facility bill each month.
Application Process
The application process starts with me. Together we review your health history and current financial situation. Then we review suitable options for you.
Each insurance company has different requirements depending on your situation. Some will only need to do a phone interview. That interview takes less than an hour. That gives them enough information to make a decision about your application.
Recap of traditional long-term care
Pros
- Lower premiums than many hybrid policies
- Personalization – these can be customized to your needs
- Possible tax advantages
- State Partnership benefits relating to Medicaid qualification
Cons
- Premiums are not guaranteed
- Strictest underwriting meaning this is the most difficult coverage to qualify for
- Use it or lose it type of insurance
- No cash value
- No return of premium (unless you select that rider, which increases premiums a lot)
What’s next?
There are several companies that offer this type of coverage. If you’d like to explore your options, give me a call, or click the link below to schedule time for us to talk.