Many Americans will need the services of a long-term care provider as they get older. Unfortunately, Medicare and private health insurance companies do not cover assisted living facilities and private home care agencies, and many seniors quickly deplete their funds paying for care.
There is no one way for you to predict whether you will need long-term care in the future. But if you’re worried about the expenses associated with it, long-term care insurance is an option to consider.
When to purchase long-term care insurance
If you choose to purchase long-term care insurance, you should do so well before you need it. Insurance companies offer policy discounts to people that are in good health when they apply. Typically, these discounts are locked in, so enrolling sooner allows you the benefit of paying for your policy at a lower rate than you would have otherwise. And your coverage will start immediately, so if something happens sooner than you expected, you will have coverage for care.
Long-term care insurance companies will not issue a policy if they feel that the risk factor is too high—i.e., you are likely to need long-term care in the near future. According to the American Association for Long-Term Care Insurance, 23 percent of applicants aged 60 to 69 are denied coverage, while only 14 percent of those aged 50 to 59 are denied.
How to purchase long-term care insurance
If you are still working, check with your employer to see if your company offers long-term care insurance. Many companies, especially large national corporations, can get you coverage at a discount.
Even if you apply through your employer, however, you should still shop around to make sure you are getting the best rate.
Certain long-term care insurance plans are not tax qualified (NTQ), while others are tax qualified (TQ). Contributions to TQ plans are tax deductible, but TQ plans have more restrictions around how and when the insurance pays. NTQ plans, on the other hand, generally have fewer restrictions. Carefully review the policy details to determine whether the benefits of having an NTQ plan outweigh the tax-deductible TQ premium.
Long-term care insurance should be purchased only after consulting with family. Each person’s financial situation is different and requires different considerations to be made.
Jacob Edward is the Manager of Senior Planning, a long-term care-planning agency in Phoenix, Arizona.
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