“Long-term care” is a term that refers to financial coverage plans required by patients that have a chronic illness, disability or an ailing condition. It is referred to as AARP long-term care plans as the illness usually requires the services to be extended for a long period of time. The type of AARP plan can differ depending upon the kind of illness suffered by the individual. The plans can cover medical help that includes simple activities like bathing, dressing, and eating and goes on to other complex activities that require nurses, therapists or other professionals.
By the time you are a senior citizen, there is a 50% chance that you will know if you require a long-term care (LTC) or not. If you suffer from a medical condition and have to pay out of your own pocket, you will spend $140,000 on average. Most people do not plan for such a high financial risk before; only 7.2 million Americans have the AARP long-term care plan that covers most of the costs that are not covered by Medicare. Here are 5 things you must know about the LTC insurance:
Traditional practices are not popular
For most years since its inception, a long-term care insurance involved paying an annual premium in return for help with day-to-day activities. The long-term care plan can give you financial assistance for these services as and when required by you. The terms today include a daily benefit of $160 for nursing home coverage, a maximum of three years of coverage and a limited waiting period of three months before the costs are covered by the insurance. As time has passed, the AARP long-term care plan has fallen in terms of popularity, as there have been irregular spikes in the premiums as well as multiple losses for the insurer. These have been due to the improper forecasts by insurers about the amount of care they might have to provide to their clients. The price of the premium was not enough for them to cover the medication as the insurance covered a large umbrella of conditions. The sales have fallen sharply. There were more than 100 insurers that sold policies in the 1990s as compared to only 15 that sell them now.
A plan is more important than the insurance
The price of the premium can go up to $2,700 a year, according to LifePlans – an industry research firm. This means that the coverage amount is out of reach for a large population of the country. However, there is a benefit for married individuals as there is a 30% discount as compared to the policies bought separately. If you have very few assets, then you might be able to cover the long-term care plan costs via Medicaid, only if you are impoverished. Saving money could be another way of having a plan for future medical problems, but you must have a lot of cash saved for this. If you save less than 4 percent of your annual earnings then you can not be in a position to buy an insurance. You will need a proper plan for you to be able to cover the medical expenses.
A hybrid alternative
Just as the old long-term care plans are falling out, they have given rise to a new hybrid alternative. These hybrid plans will not take the accumulated amount away from you like the earlier insurance. They will, instead, return the amount to your heirs incase it goes unused. You will also not run a risk of a hike in premium that is aligned with traditional policies. The premium is locked upfront and is not changed under any circumstances. If you are above 50 or have health problems, it will be easier for you to qualify for this insurance.
Old school policies are cheaper
Long-term care plans might not be appealing because of their long-term nature, but they are definitely better for your pockets. Even if your AARP long-term care insurance plan passes off without any use, it will still be a cost-effective coverage. The newer hybrid policies are two to three times costlier than the traditional long-term policies even with the same benefits being offered. With a hybrid insurance, the selling point is usually a high expectancy of getting the money back. A hybrid policy will make sense for you only if your backup plan is to use it as savings.
Smart shopping pays off
If you are looking to buy insurance, it is important that you buy it in your 50s or early 60s, before the premiums rise or your health starts to worsen. It is surprising that the delay of even a year can change the premium significantly. For example, the initial premiums at the age of 65 are 8 to 10 percent higher than the ones that are offered at 64. As far as shopping for insurance policies is concerned, you must always look for an individual agent who has insurance policies from different companies. This will give you a choice of many different insurers and you can weigh your pros and cons and zero down on a decision.
