While planning for old age insurance provisions, the costs of long term care insurance can cause considerable worry. This article is a brief description of such an insurance policy, that will put your worries aside.
Many a time, you will come across statistics and facts such as ‘1 in every 5 Americans will become a senior citizen by 2030’ or ‘about 7 million Americans need long term care’. It is a known fact that senior citizens may require long term care in their later life, which is one of the ways to battle against old age problems. The term ‘long term care’, defines facilities that help senior citizens in performing the activities of daily living (such as eating, bathing, and even taking a simple yet joyful walk in the garden). Hospice care, nursing homes, senior citizens’ homes, adult daycare, and Alzheimer facilities, are some common examples of facilities provided in this policy. Living in a nursing home or an adult daycare can be quite expensive, and this policy covers such costs.
The US government, in collaboration with insurance companies, has come up with a novel insurance plan, that is termed as the long term care insurance. Insurance cost is an important issue that has to be considered by every middle-aged person.
It (also known as LTC or LTCI) is an insurance product commonly sold in the US and UK. These policies have a different coverage and operation. The basic intention of generation of such a policy is that any senior citizen or person with disability or chronic ailment, should be able to take care of himself by availing the long term care facilities. One of the biggest advantage of such a policy is that the coverage is provided to almost any person, irrespective of his or her age.
How does it work?
The biggest drawback is that policy holders and insurance providers have to juggle the probability of health-related uncertain events that might come up during the time period of the policy. Hence, insurance providers usually calculate the annual premium and coverage differently for every person. Some of the important factors that are considered by companies for calculation of the policy cost, annual premium, and policy time period include:
- Age of applicant
- Current health insurance coverage
- Current ailments
- Past addictions
- Chronic and non-chronic ailments
- Diet and exercise routine
After the application is filed and processed, the insurer requests the applicant to go through some important medical examinations. These policies have a waiting period that can be as long as 10 years (have lesser premiums), but at the same time it can be as short as 1 year (higher premium). After the waiting period of the policy is over, the policy holder can enjoy the benefits of the coverage till the time period of the policy lapse. Such policies can often be renewed at a discounted rate, and can also be modified.
How much it costs?
Aging is a matter of concern for almost every person. It is even more disturbing when, with aging, one develops chronic ailments or permanent disorders. Though the total cost is quite high, you will realize that it is also quite beneficial and necessary. On the basis of generic observations, it can be estimated that the annual cost of nursing homes can be as high as $80,000, or the expenditure of assisted living can amount to $40,000. In order to get the estimate of the premium, divide the amount by the number of years you want the policy to be.
Insurance companies also often indicate that, inflation with time and increase in charges with age, are two things that have to be essentially considered while estimating the costs. Companies also strongly consider the daily charges of nursing homes such as $100 or $200 per day, and directly pay the required amount to the nursing home, when you actually enroll in it. On the whole, if you want to consider taking this policy, you are likely to pay anything between $50 to $12,000, a month, depending on your plan.
The premium amount can be quite exorbitant. When you enter your late 40s, it is the perfect time to take up such policies. The logic is that you do not require long term care till you reach 60 to 65. Thus, you have a long waiting period of almost 20 years. The result is that you will end up paying a very reasonable amount of premium every year, instead of paying exorbitant rates, and even if you continue or renew your policy, you will have a large volume of personal savings at your disposal.
If you suffer from any disability, it is recommend to have a life insurance policy at a young age plus a long term care insurance at exactly 40 or even 35. The logic is simple, a healthy waiting period means that you will incur least costs.