An Industry Insider Explains How Long-term Care Insurance Works

When I first started blogging about long-term care issues, I thought it would be easy. After all, I’ve been in the insurance industry my whole professional life. The many awards and accolades I’ve received over my career are proof that I know what I’m talking about. I know how insurance works, and I know how long-term care insurance works.


What I didn’t know was how blogging works. I didn’t know how social media works. I didn’t even know what the acronym SEO stood for, let alone know how it works. If I wanted to teach people about retirement, long-term care, and LTC insurance, I needed to figure it out.


Have you ever had that experience? You want to do something new in your wheelhouse of skills that you believe is pretty straightforward and easy. But it turns out you’re caught in a quagmire of other things you have to learn first.


It can be frustrating and time-consuming.


So to make your life easier, I’m going to do what I wished someone would’ve done for me with blogging. I’m going to explain the gist of how insurance works, and more specifically, how long-term care insurance works. And I’ll try to make it quick and easy, and not too boring.


How Insurance Works

At its most basic level, insurance gives us a way to hedge our bets against common life events. It reduces our risk. We pay our insurance premiums, and in exchange, our insurance company pays for all/part of a future life event. That event could be an auto accident, house fire, cancer diagnosis, or an extended stay in a nursing facility.


There is uncertainty about whether we’ll experience one of these life events. Because of the uncertainty, having insurance means sharing the risk with others who also share the uncertainty. Some will never use the insurance for its intended purpose, while it will save others from catastrophic loss. 


The more people sharing the risk and paying their premiums, the lower the percentage of people who make claims.


Insurance companies make their money by accurately predicting the odds of people experiencing these life events and making claims. They set premium rates at a point where those with no claims pay for those with catastrophic claims.


How Long-term Care Insurance Works

Generally speaking, long-term care insurance offers financial support to help pay for long-term care. Good policies let you get that care at home, in adult day care, assisted living, nursing home, or hospice. They usually pay for homemaker services, personal and nursing care, and respite care. They don’t pay for medical care.


Long-term care insurance is increasingly important as Americans are living longer, but not necessarily healthier, lives.


It is best to buy a long-term care insurance policy when you are healthy and in your fifties. The younger you are, the lower your premiums (although there will be more of them). As you age, you’re more likely to develop disqualifying illnesses. And like other types of insurance, once you need long-term care, it’s too late to buy a policy.


If you’re in your sixties or older, you can still qualify for long-term care insurance. But, you have to pass the initial health screening. Of course, the older you are when you apply, the higher your premium payments will be.


Hedging Bets on Your Long-term Care

It’s impossible to know if you will need long-term care insurance, just like it is impossible to know if you’ll need to use your car insurance. But just like you wouldn’t want to be caught without car insurance, you won’t want to be without long-term care insurance.


A single year of paying for long-term care in a private room at a nursing home is expected to cost $166,845 in 20 years. According to the U.S. Department of Health and Human Services, “most Americans turning age 65 will need long-term care services at some point in their lives.”


Let’s look at a comparison. If you have a mortgage on your home, you’re required to buy homeowners insurance. It’s the bank’s way of hedging their bet that your house won’t be completely destroyed by fire or another disaster. The chances of your house burning to the ground are .03%.


In contrast, any 65-year-old has a 70% chance of needing long-term care before they die. And the odds are 50/50 they’ll need it for more than a year. In fact, five out of every 100 people will need over $250,000 worth of long-term care in their lifetimes.


New Choices in Long-term Care Insurance

The services and support you’ll need, of course, vary according to your individual situation, but the best long-term care insurance policies have features like multiple modes of care, reimbursement and indemnity options, care coordination services, shared care benefits, flexible payment options, guaranteed premiums, and asset protection.


If you have substantial assets that you need to protect from possible long-term care costs, Premier Plan is made for you. Sure, you may be able to pay for your long-term care out-of-pocket, but why would you want to?


If you want to stay in your home, choose a policy with a cash option. This lets you pay cash to family or friends who serve as caregivers. Use it for respite care when your caregiver is temporarily unavailable to care for you in your home. When in-home care is no longer an option, you can transition your payments to an assisted living facility, nursing home, or hospice if needed. The Flex-Plan Advantage is an affordable choice in this scenario.


Maximize Your LTCi Benefits

An indemnity option also allows you to maximize your benefits. Reimbursement benefits pay you back for out-of-pocket expenses that go to cover the cost of professional care in your home or a long-term care facility. The amount reimbursed can’t exceed the maximum daily benefit stated in the policy. If the cost of your care is more than this amount, the difference isn’t covered by the insurance company.


With an indemnity option, you receive the maximum daily benefit even if your costs are lower than this amount. Cash payments can cover services by professionals, family members, or even friends who provide home-care. Use cash payments to pay for renovations that make your home accessible, and for medical appliance purchases.


Another advantage to choosing the cash option is that the 90-day exclusion period that normally applies is waived. You can receive cash payments from the first day you qualify for long-term care with the policies I hand-selected.


We have a partner that offers a hybrid policy that combines long-term care insurance and death benefits. This premium plan gives policyholders access to concierge-level care coordination services. They help you and your family make informed decisions about your care and understand how to access your benefits.


While you’re shopping for long-term care policies look for flexible payment options, guaranteed premiums, and various asset protection strategies. Choose the best policy for your specific long-term care needs and financial situation.


What Should You Do Next?

Okay, once you’re armed with knowledge about how long-term care insurance works, what should you do next? Again, let’s keep it simple.


You can call 844 805 3557 to pre-qualify over the phone. We’ll let you know in that call if you should proceed with the application process, or not. If you don’t want to call, you can email through the contact page on the Capital Retention website. And we’ll call you back.


Once we chat about your unique situation and options, we can meet, or you can apply online. When you’ve selected the best policy for you, we’ll present you with a Long-term Care Insurance Policy Illustration. That’s basically a multi-page confirmation of the coverage, options, benefits, and costs you’ve selected.


You’ll also get a Break Even Analysis. It shows how many days you would have to use your LTC insurance to break even on premiums paid. In every case, your break even point will be under one year of care.


You look over your illustration and make any adjustments to benefits and costs until you’re satisfied. Then we’ll go over your long-term care contract and you begin paying your premiums.

Did I Deliver?

I promised I’d try to give a quick and easy overview of how long-term care insurance works. When it’s your future, it’s never boring.

Now you can relax, confident that you have a solid plan for your long-term care. You can go about planning your retirement knowing that a long-term care event won’t derail it.


Call 844 805 3557 now, while you’re thinking about it, or complete the contact form on the Capital Retention website.


Congratulations on taking action you can feel good about. You aren’t just protecting your financial future and preparing for your long-term care. You’re protecting your family, or whoever else would otherwise need to provide care for you at their own expense.

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