Since beginning our series on affording senior living, we’ve shared guidance on evaluating senior living costs, offered tips to manage resources for a successful move, and outlined four steps to help seniors and caregivers plan for senior living costs.
One of those steps, and an important one to consider, is the option of long-term insurance. Long-term care insurance policies can help to finance the cost of senior living in various ways. In this article, we’ll explore what long-term care insurance is, how it can help pay for senior living, and why it may be a valuable asset to have.
What is Long-Term Care Insurance?
Simply put, long-term care insurance is a type of insurance product that provides coverage for long-term care services as we age. Most long-term care insurance policies are broad and cover specific services relating to activities of daily living (ADLs). Policies cover services in a variety of settings across the healthcare continuum, such as:
• Home health care
• Adult day care
• Independent living & assisted living
• Memory care
• 24/7 care in a family home or senior living community
• Skilled nursing care
• Hospice care
While policies can vary, covered services generally include:
• Assistance with personal care: getting dressed, taking a shower, using the restroom, continence care, hygiene tasks, eating, etc.
• Medication management: Assistance with ordering, dosing, and remembering to take medications correctly
• Mobility assistance: getting in and out of bed, getting in and out of a vehicle, general transferring (such as between a bed and chair), escorts to and from with assistance using a wheelchair or walking
• Support for cognitive changes related to dementia
• Physical therapy, occupational therapy, and speech therapy
• Round-the-clock care at a skilled nursing facility
• Some policies also cover non-medical services, such as assistance with laundry, housekeeping, transportation, and meal preparation. Other services, such as care needs related to alcoholism, mental illness, and addiction are not considered covered services or are only covered if the long-term care policy was in place before a diagnosis was received.
Long-Term Care Insurance and Senior Living Costs
Long-term care insurance is valuable because it can help to cover the cost of supportive care as we age. Some might assume that Medicare or traditional health insurance will provide coverage for these types of services, but this is not the case. Care and services to support a senior’s independence as they age, whether provided in a family home or a senior living setting, are privately paid for by the individual or family. These costs can quickly add up, placing a financial burden on an aging adult.
For active, independent seniors, a long-term care insurance policy may seem like an unnecessary expense, but when care needs change, budgeting for services to safely maintain independence can be costly. These services range from assistance with meal preparation to medication management, transportation, housekeeping, personal care (getting dressed, taking a shower, etc.), and more.
How does long-term care insurance help cover the cost of senior living?
It’s important to note that the benefit of carrying a long-term care insurance policy when considering a move to senior living is the assurance that as your care needs increase, you will have supplemental coverage to manage the additional cost of care services. Nearly every independent living resident will require some kind of assistance and support as they live out their years in the senior living community they call home. You may hear this referred to as aging-in-place.
• Long-term care insurance generally does not cover the cost of living/housing in an independent or assisted living community, but a policy can provide coverage for services that enable a senior to maintain an independent lifestyle.
• Long-term care insurance can help extend the length of time a senior with increasing care needs can live comfortably in an independent or assisted living community without requiring a move to a skilled care facility, or nursing home. With long-term care insurance, financing the cost of care in a senior living community can delay the need for 24/7 specialized care in a skilled nursing facility, where daily rates can exceed $300 per day.
Can long-term care insurance help with assisted living and dementia care?
If a loved one receives a diagnosis of dementia after a long-term care insurance policy goes into effect, coverage for dementia care in an assisted living setting is likely to be applied. However, some long-term care insurers can deny coverage to those looking to enroll with a current diagnosis of dementia, as health qualification is needed. Check with multiple companies to find the best coverage option, as this can vary depending on the insurer.
• For seniors living with dementia in an assisted living setting, long-term care insurance can provide coverage for costs related to memory care services and support. These services typically include assistance with activities of daily living (showering, getting dressed, daily personal care, etc.), enhanced safety checks (routine reminders, escorts to and from activities/ meals, wander protection), and additional staff trained in dementia care best practices.
What kind of long-term care insurance policy should I purchase?
Many different types of long-term care insurance policies can help to finance the cost of senior living. Some are traditionally structured to cover the cost of long-term care while others may provide a life insurance benefit as well. These hybrid policies, as they’re called, can help to provide some return on investment, or premium, for the rare occasion that an individual does not require long-term care services.
When considering a move to senior living, make this known to your insurance company before purchasing a policy to ensure you have the right coverage. Discuss the cost, requirements of the policy, and details of the policy’s benefits, such as:
• What is the waiting period? It’s important to know the waiting periods for coverage, especially if you are trying to coordinate a senior living move with long-term care insurance benefits.
• How is coverage structured? Understand how benefits are reimbursed. Are individual expenses covered as they are billed or does the policy cover only a portion of services?
• What’s not covered? What limitations are included in the coverage? Some policies may have a daily and/or yearly benefit allowance/amount or specify certain care services that are not covered.
• What changes? Can benefits be adjusted with inflation through the years? How often do the rates increase? Does the coverage change?
How much insurance will I need?
There are numerous factors affecting how much insurance an individual will need, but on average, the National Council of Aging estimates that “women tend to need care for longer (an average of 3.7 years), while men need care for an average of 2.2 years.”
Meeting with an insurance professional who can advise you in selecting the right long-term care policy is recommended, as policies and coverage can vary greatly. For more information about long-term care insurance costs and planning for senior living, check out Genworth’s Cost of Care Survey.
How much can I expect to pay for a policy?
Costs for long-term care policies vary greatly. Women often pay more for a policy than men do; however, there can be discounts available to spouses who enroll together. The cost of a policy will be determined by your age, your health and level of independence, and the amount of coverage you are looking for.
According to The American Association for Long-Term Care Insurance (AALCI), the average cost of long-term care insurance in 2023 was “around $1,200 per year for a 60-year-old man with $165,000 in coverage, while a 60-year-old woman would pay approximately $1,960 for the same coverage.”
The AALCI offers abundant resources for those looking for long-term care insurance information. For information about selecting and qualifying for a policy, or a free no-obligation quote, visit their site, contact the Association at (818) 597-3227, or speak with an experienced long-term care insurance professional to learn more.
Is Long-Term Care Insurance the Right Investment?
The cost of senior living and long-term care requires a substantial investment. However, like moving to a senior living community, assuming that a long-term care policy is financially out of reach, can be a mistake. With the right guidance, these options might be more accessible than you think.
Connect with a trusted financial advisor, experienced insurance professional, and a senior care counselor to determine the best decision for yourself or your senior loved one.
To learn more about the financial advantages of moving into a senior living community, check out Cardinal Bay’s valuable free resources and subscribe to our blog. Schedule a visit today and experience the many benefits of life in our independent living, assisted living, and memory care communities in Texas and Oklahoma.