Did you know that neither your health insurance nor Medicare would pay for extended long-term care services in the event that you needed them in the future?.
If you develop a chronic illness or become disabled and can no longer care for yourself for an extended period of time, you’ll need long-term care services.
And they aren’t cheap.
The median cost for a home-health aide for an eight-hour day is more than $49,000 a year, while nursing care in a facility with a private room has a median cost of almost $98,000 a year.1 As life expectancies increase, so does the duration of long-term care needs, and the financial burden may end up falling on your loved ones after you’ve run through your own life savings.
In New Jersey the cost of Long-Term Care is as follows as of 2019 on average. In Home Care = $48,345/annual which provides the eight-hour day home-health aide. Nursing care in a facility with a private room is on average $118,625/annually in New Jersey.
The potential expenses of long-term care are wide-ranging and long-lasting, covering nursing home bills, day care services, home modification and assisted living facilities, among others.
Types of Care
Long-term care insurance pays for a wide range of services and procedures that typically aren’t covered by medical insurance. The types of care fall into three categories: skilled, intermediate and custodial.
If you have a serious illness or injury that you can recover from, you will probably receive skilled care from nurses or professional therapists. Skilled care is provided daily, usually ordered by a physician, and involves a treatment plan. In short, skilled care helps get you better.
This type of care is similar to skilled care, but not provided on a daily basis. For instance, if you injured your leg and need to visit a physical therapist five times a week to help you heal, that would be considered intermediate care.
Unlike skilled and intermediate care, which is used to improve your health, custodial care isn’t intended to heal you. Instead, custodial care includes assistance with daily activities like bathing, eating, dressing, toileting (getting on and off the toilet and other tasks associated with personal hygiene), continence and transferring (getting in and out of bed and chairs). Catheter or colostomy maintenance is also included. Custodial care can range from in-home care provided two or three days a week, to 24-hour nursing home care.
Who Needs It?
Given that the cost of long-term care can quickly deplete your life’s savings, you should seriously consider adding long-term care insurance to your financial plan. Plus, there’s about a 70% chance you’ll need some type of long-term care after age 65.
Should you ever require it, a home health aide visit costs $48,345/annually in New Jersey, while full-time nursing home care in a private room, the most expensive type of care, now has a cost of $118,625 in New Jersey a year. While financial considerations cannot be understated, long-term care insurance is also about peace of mind and control. Having it ensures you’ll have access to first-rate care when you need it, and that you won’t have to be dependent on others or be a burden to your children. The odds you’ll need long-term care insurance are greater than you might imagine.
Long-term care services are not just for older people: Anyone who’s has been in an accident or suffers from a debilitating illness may also require round the clock care. In fact, 40% of patients receiving long-term care are under age 65.
Why To Plan For Care
A Long-Term Care need does not necessarily need to be filled with a Traditional Long-Term Care Policy. Insurance companies have changed their thinking when it comes to providing care, and have provided more options for insureds.
There are policies that are fully guaranteed, meaning guaranteed premiums with guaranteed premiums. Long-Term Care insurance with traditional policies have seen premium hikes or benefit decreases, many insureds in their 70’s and 80’s that took out traditional long-term care policies out a number of years ago are receiving these notices from insurance companies. NO MORE, insurance companies have provided alternate planning strategies of guarantees so clients are guaranteed their benefits.
Hybrid Long-Term Care – In New Jersey there are a number of hybrid long-term care insurance options. Hybrid long-term care has 3 main components to the policy. First is the cash value, insured can fund the policy with single premium payments, payments between 5-20 years or even pay for life(premium waived once on claim), as those premiums fund the policy, the policy builds cash value. The cash value feature allows the insured to walk away from the policy with cash value if they need to down the road. Second is the Death Benefit feature. The question often asked is, “what if I never need care?” the death benefit feature in the hybrid policy will pay out to the insured’s beneficiaries just life a life insurance policy. Third is the Monthly Benefit Amount, the monthly benefit amount is the amount of benefit that is provided on a monthly basis for the insured if they go on claim.
Hybrid policies have a few other advantages. In New Jersey, hybrid long-term care insurance has a few carriers that will allow for joint insured’s. The joint insured’s can be husband & wife, business partners, parents & child, domestic partnerships. One of the carriers view the joint insured status as blood relation, business relation and bill relation. If the joint insureds share in any of these, they can be written together on a policy. The benefit period of a hybrid long-term care insurance policy is very important, benefit periods normally range from 48 months to 60 months. In New Jersey, there is a long-term care carrier that will write lifetime benefits, even on a joint policy. For example, if both insureds go on claim for in home care at age 80, and at age 85 go into nursing home care, and both pass away at age 90, the insurer will pay for 10 years of benefits.
Life Insurance with Long-Term Care & Chronic Illness Rider’s– Life insurance policies are now offering riders for Long-Term Care or Chronic Illness Rider’s. These riders will accelerate the death benefit, normally at a 2% rate on a monthly basis and pass that acceleration on as a living benefit. If the insured has a policy with a $250,000 death benefit, if they go on claim, they would receive $5,000 a month for 50 months. Depending on the carrier, premiums are waived once the insured are on claim, some carriers do require a pro-rated amount of the premium to be paid as the death benefit is decreasing. Once the policy is fully accelerated a few carriers provide small additional death benefits of $5,000 to be paid out on the death of the insured.
Traditional Long-Term Care Insurance- Traditional long-term care insurance policies are similar to auto or medical ones in that you “pay-as-you-go” through monthly premium payments.These plans do not typically have a return of premium feature unless you purchase a death benefit rider. Hence, premiums are much more affordable on traditional long term care insurance policies. The elephant in the room with traditional long term care insurance policies is that premiums and benefits are not guaranteed and we are currently seeing that today with carriers sending out invoices. With the traditional policies not being guaranteed, the premiums can increase and/or if you would like to keep you premiums the same, the carrier will offer to lower your benefit amount. As an agency we use traditional long-term care in only certain circumstances due to the non-guaranteed features of it.
Contact us to explore long-term care insurance coverage and if it may be a good fit for you and your family.