When do people start thinking about long-term care insurance?

Usually when someone they know needs it, said Candy Grimsley, independent agent with Crawford Insurance Agency in Strasburg.

“If they watch somebody go through that, then they think about it,” she said.

But while she encourages people to think about a long-term care policy, she said it’s not something to jump into lightly.

“People need to shop around,” she said. “They need to be very careful, and they need to talk with somebody that they really trust.”

Long-term care insurance protects people if they find themselves with a long recovery from an illness, injury or disability and need at-home care or extended care in an assisted-living facility or nursing home. Long-term care insurance reimburses policyholders for the care they receive at home or in a facility, starting after a month or two of services.

Unlike some other types of insurance, long-term care insurance is something to buy in case you need it while hoping you never will.

A 2018 bulletin by the American Association of Retired Persons reports that half of all Americans 65 or older will require paid long-term care someday.

The U.S. Department of Health and Human Services (HHS) put 2017 estimates a little lower, saying 40 percent of people 65 and older will use paid care, though it also says someone who turned 65 that year would have an almost 70 percent chance of needing some type of long-term care services, either paid or unpaid, in their remaining years.

Though one-third of today’s 65-year-olds may never need long-term care services, HHS (https://longtermcare.acl.gov) says at least 20 percent will need it for longer than five years. The average is 3.7 years for women and 2.2 for men.

About 7.2 million Americans have long-term care insurance, the AARP reports. That’s a little more than 2 percent.

The risks of insurance

Buying insurance can be as risky as not buying it.

Long-term care insurance could feel like a waste of money to those who pay into a policy they may never use, Grimsley said.

She had one such client paying on a cancer policy in the event of one day developing cancer and needing treatment.

Because long-term care insurance picks up where health insurance leaves off, it can also provide peace of mind. Grimsley said people should consider all outcomes and make the best choice they can for themselves or their loved ones.

“Even your car insurance…” she said. “You don’t put insurance on your car hoping to have a wreck so you use it.”

However, she said the chance of not having it and needing it is unthinkable.

“It would scare me to death.”

Long-term costs

A big consideration people have when they buy insurance is that Medicare doesn’t cover long-term care.

“Other federal programs, such as the Older Americans Act and the Department of Veterans Affairs pay for long-term care services,” the HHS reports, “but only for specific populations and in certain circumstances.”

Medicare pays 100 percent of short-term medical costs for up to 20 days, Grimsley explained. From 20 to 100 days, they pay all but $170.50 per day, she said.

“After that, you’re on your own if you don’t have a long-term care policy,” she said.

The average Medicare-covered stay in a nursing home is 22 days, according to the HHS.

In Winchester, the average cost of long-term care ranges from $61 a day (for adult day health services) to $350 a day (for a private room in a nursing home), which insurance company Genworth reports at its website, https://www.genworth.com.

Home health aide services average $127 a day in Winchester, a stay at an assisted living facility is $152 a day, and a semi-private room at a nursing home is $333 a day, the site reports.

In Harrisonburg, those same services range on average from $57 to $317 per day. The state median for long-term care services ranges from $70 to $280.

Someone without insurance who ends up needing long-term care is “at the mercy of Medicaid,” Grimsley said.

If using Medicaid, she said, “You have to go wherever they put you.”

Furthermore, Medicaid picks up costs only after other payment options are exhausted. That can mean having to sell your home and assets to pay for your stay in a facility that accepts Medicaid payments.

“Long-term care [insurance] gives you the power of choice and control,” Grimsley said.

It also protects the policyholder’s assets, such as savings, investments and any items they would want to leave their family.

Most people haven’t planned for the financial risks of long-term care, according to the AARP bulletin.

“If you pay out of pocket,” it says, “you’ll spend $140,000 on average.”

What you’ll pay

Women are likely to pay far more for long-term care insurance policies because they tend to live longer than men and on average require longer periods of long-term care.

Mutual of Omaha has an online calculator at mutualofomaha.com/long-term-care-insurance calculator where those looking into getting insurance can estimate their monthly payments for a policy. These are only estimates because policies will take into account other factors such as current health and medical history.

By their calculator, a 55-year-old single woman living in Strasburg and looking for a monthly benefit of $4,556 (about $150 a day based on 365 days a year, or roughly $164,000 over three years) would pay $265 a month.

A 55-year-old single man living in Strasburg would pay $164 each month for the same policy.

Couples might cut costs if both partners have policies. A 55-year-old married woman living in Strasburg would pay an estimated $186 a month if her husband also has a policy. He would pay $115 per month.

The longer people pay into a policy, the better monthly rate they’ll get, Grimsley said. However, companies are allowed to alter rates as policyholders age, so the rate they’ll pay when they buy a policy might not be the rate they’ll pay 10 years later.

Long-term care insurance can bring peace of mind to aging Americans, but the reality is that most people can’t afford to spend $200 or $300 a month ($2,400-$3,600 a year) on insurance.

The National Association of Insurance Commissioners says some experts recommend people spend no more than 5 percent of their income on a long-term care policy. To stay within that range, a 55-year-old Strasburg couple would need to have a combined yearly income of at least $72,000.

In 2017, Shenandoah County reported a median household income of $53,934, according to the U.S. Census Bureau, and Warren County reported a median household income of $65,353. Nationwide, the median household income for 2016 was reported as $59,039.

Grimsley said policies vary depending on the company and the client’s needs. And although potential clients will want to start planning years before they might need long-term care, she said she hasn’t talked with anyone as young as their 20s who wants to start paying on a policy.

Policies don’t pay you more based on how long you’ve been paying in unless you have a policy that gives you money back should you never need long-term care. And since companies are allowed to raise premiums as you get older or as cost of living rates go up, the only benefit to starting early would be to protect against the unexpected.

The longer clients wait to buy a policy, the likelier they’ll pay more or not get approved at all, Grimsley said.

Clients will need to answer questions on their medical health and interests, she said. The policy they get will depend on their competency to answer questions, as well as their medical history.

“You always have to think ahead,” Grimsley said. “If you’re chronically ill and needing long-term care, you’re not going to be able to get it.”

Where it’s available

The Virginia Retirement System is working through Genworth to offer its employees long-term care plans through its voluntary group long-term insurance programs, beginning this fall, according to its website www.varetire.org. These are employee-paid plans.

“In terms of the number of long-term care insurance policyholders, Genworth is the largest in the nation,” the American Association of Long-Term Care Insurance says at its website www.aaltci.org/long-term-care-insurance-companies. However, the site adds, “In recent years, they sell few policies to new buyers.”

Mutual of Omaha, it says, “is on track to sell more traditional (individual) long-term care insurance policies than any other carrier. The company does not sell policies directly and there are many moving parts to their coverage. Thus, we recommend speaking to a knowledgeable LTC insurance specialist.”

State Farm Mutual Automobile, Thrivent Financial, National Guardian Life, and Northwestern Mutual offer policies, but State Farm only sold about 850 plans nationwide in 2018. Out of the seven million long-term care insurance policies Americans had that year, the AALTCI calls that “a very small number.”

Transamerica was once a leading provider of long-term care insurance, but the AALTCI reports no current information the company offers on new plans for individual policyholders.

Bankers Life & Casualty insurance policies are only sold by Bankers Life & Casualty career agents.

Met Life, John Hancock, Prudential, UNUM and CNA — which all used to be leading providers of long-term care insurance — no longer offer new plans to individuals, according to the AALTCI.

Alternatives

Long-term care insurance isn’t the only way to make the best of an uncertain future.

Other options are hybrid policies and reverse mortgages.

Whole life insurance can be used for long-term care, the AARP says, but unlike the older variety of long-term care insurance, these hybrid policies will return money to your heirs if you don’t end up needing long-term care.

“You don’t run traditional policies’ risk of a rate hike because you lock in your premium upfront,” the AARP says.

However, hybrid policies also cost two or three times as much as traditional policies, meaning you’re paying extra just to ensure you get money back later.

“If you want insurance, start looking in your 50s or early 60s, before premiums rise sharply or worsening health rules out robust coverage,” the AARP says.

“Initial premiums at age 65, for example, are 8 to 10 percent higher than those for new customers who are 64.”

Grimsley said some companies allow clients a provision in their policies to get a return of premium if they’ve paid in for so many years and don’t put in any claims for their insurance.

“Understand what you’re buying,” she said. “You don’t just want a home health care policy.”

In the case of reverse mortgages, the website www.payingforseniorcare.com cautions that it’s not for everyone, but might be a good idea in the following situations:

  • Single or married seniors in good health who can remain in their home and/or receive long-term care at home.
  • A married senior whose partner is receiving care but who is in good enough health themselves to remain at home

“Reverse mortgages are not the best option for married couples when both spouses require care,” the site says. “Reverse mortgages become due when the last borrower moves from the home or passes away. Renting or selling the home may be a better option.

“However, if the proceeds from a reverse mortgage can be used to pay for in-home care that enables the seniors to continue living comfortably at home, then a reverse mortgage is still an option,” the site explains.

Grimsley said it’s important to consider all options before buying long-term care and weigh the risks of having it versus not having it.

Everyone hopes they can stay at home in their declining years, she said, but life is unpredictable.

“There may come a time when we just can’t be there anymore.”

Contact Josette Keelor at jkeelor@nvdaily.com