Assisted Living Insurance Policy Benefits: When to Buy and How Much

assisted living insurance policy

“Long-term care” is a phrase that means many different things to different people. Younger people may not even know what an assisted living insurance policy is, or how and when to purchase one. Despite the various images the thought of long-term care may conjure, most people know one thing about it: it’s expensive. 

According to AARP, long-term care covers people with chronic illnesses, disabilities or other health conditions over a longer timeframe. This care can involve assistance with things like bathing, dressing, and eating, or skilled care provided by nurses and therapists. Long-term or assisted living care is something most of us would rather not think about until it’s already too late. And that’s unfortunate because there are specific policies designed to help reduce these very expenses.

Let’s take a moment to explore long-term care and assisted living insurance policy benefits.

What’s an Assisted Living Insurance Policy?

An assisted living insurance policy offers many different coverage possibilities. Experts suggest buying an assisted living insurance policy with flexible options. That’s because anticipating what your specific care needs will be as you age can be extremely difficult. You can purchase these policies individually from an insurance agent or broker. You may also purchase coverage through your employer’s group policy or for discounted company rates. (Be warned, though, that only some employers currently offer workers a long-term care or assisted living insurance policy option.) In addition, some professional organizations or service clubs, as well as state partnership programs and joint policies, may offer coverage.

No matter how you purchase an assisted living insurance policy, be sure carefully review your options with your financial advisor. Your financial advisor can evaluate whether the long-term care or assisted living insurance policy makes sense for your specific situation. Be aware that long-term care policies often exclude people with preexisting health conditions, or withhold payment for care involving them. Most policies also have a maximum benefit amount each covered individual may receive.

Assisted Living Insurance Policy Benefits and Covered Expenses

Benefits generally begin paying out when you need help with two or three “activities of daily living.” An assisted living insurance policy can help pay for in-home services, an assisted living facility, or a nursing home. Your policy should cover, or assist with, the following expenses:

  • Nursing home stays
  • Adult day care
  • Care coordination services
  • Home modification costs
  • Assisted living services such as bathing or meal delivery
  • Skilled care from nurses or therapists

When to Purchase A Long-term Care or Assisted Living Insurance Policy

Since younger people pay lower premiums, purchasing an assisted living insurance policy in your 40s or early 50s is ideal. Long-term care facilities and in-home nursing staff can cost more each year than your current annual salary. Getting covered early is a savvy choice for many people, but older or chronically ill individuals may not be eligible.

If you stop paying your assisted living insurance policy premium, a “nonforfeiture option” may allow you to receive a reduced benefit amount that’s based on how much you already paid. Some states require policies to offer nonforfeiture benefits; others do not. Check with your state’s insurance department before ceasing any premium payments.

How Much Coverage Should You Purchase?

There are several factors you should consider when purchasing long-term care insurance — including how much coverage you actually need. These factors include:

  • Your current age and health
  • Premium payment affordability (given your current income)
  • Local support system availability
  • Amount of your total savings and investments
  • Your tax situation

You may be able to deduct long-term care insurance premiums from your federal income tax returns. That’s primarily true if you itemize your deductions and meet other IRS requirements. With so many different factors to consider, always speak with an expert before purchasing this kind of insurance.

Review Your Policy Options With An Advisor

A financial advisor can also review whether your policy needs compound or simple inflation protection. This ensures your benefit payout will keep pace with increasing care costs over time. Most experts recommend compound inflation protection for policy purchasers younger than 70 years old. Talk to your financial planner to get the best available deal for your family.

Leslie Sullivan
Exclusively covering all finance-related topics, including investing, saving money, estate planning, insurance, lowering your tax burden and everything you need to know about planning a comfortable retirement.
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