What is Long-Term Care Insurance?

Perhaps you or a loved one has recently recognized the need for long-term care insurance. This type of insurance is not just “nursing home” coverage but is insurance that helps assure you of continued independence and protects your personal assets. Long-term care insurance helps to pay for care for an extended period of time, whether that be in a nursing facility, rehabilitation facility, or providing in-home assistance to those who need help with Activities of Daily Living (ADLs).

Long-term Care | North Carolina Long-Term Care Planning Lawyer

To ensure any policy is effective, it is made up of guidelines to benefit the policyholder, including:

  • Insures against future long-term care expenses;
  • Requires an annual premium; 
  • Does not have any cash value or death benefit; and
  • Has premiums that can increase in the future.

A long-term care insurance policy functions a lot like a homeowner’s policy. You pay your premiums yearly, and if you have a claim, you file the claim. But if you never have a claim, you never collect any benefits from the policy.

What Should I Expect to Pay?

Quotes for long-term care insurance vary based on age, sex, current health status, and more, but the American Association for Long-Term Care Insurance has put together averages for 2022 based on age when purchased for an initial policy benefit of $165,000. 

The policy benefit amount can stay the same for the entire life of the policy, or the policy amount can grow at different percentage rates each year. The more a policy benefit(s) grows per year, the more the annual premium costs. While having a policy benefit that increases annually requires a higher premium, the increase in the policy benefit(s) can help account for a future rise in care costs as well as the higher likelihood of needing long-term care the older you get. 

Annual Premium When Purchased at Age 55

Single Male, no change in benefit amount

$950

Single Male, benefits increase by 2% yearly

$1,750

Single Male, benefits increase by 5% yearly

$3,685

 

Single Female, no change in benefit amount

$1,500

Single Female, benefits increase by 2% yearly

$2,815

Single Female, benefits increase by 5% yearly

$6,400

 

Couple (both 55), no change in benefit amount

$2,080

Couple (both 55), benefits increase by 2% yearly

$3,870

Couple (both 55), benefits increase by 5% yearly

$8,575

 

Annual Premium When Purchased at Age 65

Single Male, no change in benefit amount

$1,700

Single Male, benefits increase by 2% yearly

$2,600

Single Male, benefits increase by 5% yearly

$4,200

 

Single Female, no change in benefit amount

$2,700

Single Female, benefits increase by 2% yearly

$4,230

Single Female, benefits increase by 5% yearly

$7,225

 

Couple (both 65), no change in benefit amount

$3,750

Couple (both 65), benefits increase by 2% yearly

$5,815

Couple (both 65), benefits increase by 5% yearly

$9,675

You can see the way that sex and age can impact the annual premium amount, and those numbers do not account for someone with health complications! 

Will My Premium Stay The Same?

Probably not! It’s critical to understand that long-term care insurance is much like health insurance because the annual premiums can increase in the future. When you purchase your long-term care insurance policy, you are part of a “class” of policyholders. When the insurance company issued the policies, the company estimated the cost to maintain the policy and pay claims under the policy. However, over time, if the policies end up being more expensive to maintain than expected—either due to increasing costs of long-term care, higher claim incidents, or other factors–the insurance company can increase the premiums for all policyholders in the applicable “class.”  

If the premium increases, the insurance company will generally offer you the option to pay the increased premium to keep the existing coverage or continue paying the same premium you were accustomed to paying, but your benefits under the policy will be reduced.

Is Long-Term Care Insurance My Only Option?

No! Thankfully, there are many alternatives to this type of long-term care insurance that can allow you to avoid rising premiums or receive some type of benefit if you do not utilize the benefits before your death.

Here are some alternative options to traditional long-term care insurance:

  • Life Insurance with a Long-Term Care Rider: With this type of policy, the insurance company will allow the insured to accelerate the death benefit of the policy if the insured is unable to perform two of six daily living activities or if the insured is cognitively impaired. 
  • Annuity with a Long-Term Care Rider: This type of policy starts as an annuity, meaning that the underlying policy has a cash value. If you die, generally, this cash value will pass as a death benefit to the beneficiaries that you name on the policy. But when you add the long-term care rider, the policy creates a pool of funds that you can draw off of for long-term care expenses. 

We Can Help You Develop a Long-Term Care Plan

Having assisted many Wake County clients with long-term care planning, our team at Carolina Family Estate Planning understands that developing a long-term care plan is about not just protecting your own independence and dignity but also protecting those you love from the physical, emotional, and financial toll that caring for a loved one can take.

We’ve helped many clients take an interdisciplinary approach to their long-term care planning by exploring both legal and financial options. Usually, a well-rounded long-term care plan will involve a combination of legal, health care, and financial tools to meet your goals and maximize your protection. To get started, register for an upcoming seminar to learn more or call our office at 919-587-8364.

Jackie Bedard
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Attorney, Author, and Founder of Carolina Family Estate Planning
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