Long-term care insurance can help cover the costs of essential services you may need, preserving your savings while still receiving the necessary care. Understanding what this covers and what disqualifies you from long-term care insurance can help you decide if it’s a good addition to your plan.
This type of care is distinct from traditional healthcare and involves assistance performing routine functions, like bathing, dressing, and eating. It can also be costly. Although you may not expect to need it, long-term care is a significant issue that many people are likely to face, particularly as they get older. There’s an approximately 70% chance that someone who’s 65 will need long-term care at some point in the future.
What Are the Qualifications for Long-Term Care Insurance?
Like health and life insurance, you can’t wait to purchase long-term care insurance when you already need it. You must buy it ahead of time. In order to qualify, you’ll need to be generally healthy at the time you obtain a policy. As part of the application process, you typically need to complete a health screening that will likely include a questionnaire, review of past medical records, and possibly an interview.
If you’re approved for a policy, certain conditions must be met before the policy begins to pay for care. Although the specific terms will vary between insurers and contracts, they will generally revolve around your inability to perform one or more of the Activities of Daily Living (ADLs). These include:
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Eating
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Bathing
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Dressing
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Transferring (moving yourself, such as getting out of bed)
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Toileting
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Continence
What Disqualifies You from Long-Term Care Insurance?
While LTC insurance can be a good choice for many, it’s not available to everyone. Here are the most common reasons people are denied coverage and who these disqualifiers tend to affect:
Age
Premiums become more costly and your chance of approval goes down with age. Some insurers won’t issue policies to people beyond a certain age, generally around 75 to 80 years old.
Pre-Existing Chronic Conditions
If you’ve already been diagnosed with certain chronic illnesses, such as Alzheimer’s disease, Parkinson’s, multiple sclerosis, or even uncontrolled diabetes, you may be automatically disqualified. These conditions increase the likelihood you’ll need care soon, which makes you a higher risk from the insurer’s perspective. This can impact older adults who wait until health issues arise before applying. This is why you should consider obtaining coverage earlier than you might think you need it.
Cognitive Impairment
Memory loss can quickly escalate, putting you in a position where you need expensive full-time care. Even mild cognitive decline, often documented in a medical record or observed during the screening process, can lead to denial. This is more typical in seniors in their late 60s or 70s, especially if there’s a family history of dementia.
Functional Limitations
If you’re already having difficulty with ADLs, like bathing, dressing, or eating, you’ll likely be disqualified. This signals that you already need the care and poses a significant risk to the insurer. This may be more likely to affect individuals recovering from surgery, injury, or illness who have impaired mobility or independence.
Recent Hospitalizations or Rehabilitation
Recent stays in the hospital or skilled nursing facilities, especially related to chronic or degenerative conditions, may flag you as high risk. People managing health setbacks or recovering from serious illness may be asked to wait and reapply later (or may be denied altogether).
Mental Health History
A history of serious mental illness, especially if it has required hospitalization or ongoing treatment, also puts you at serious risk of rejection. This can disproportionately impact individuals with conditions like schizophrenia or severe depression, even if those conditions are well-managed.
How to Pay for Long-Term Care Without Insurance
Whether you don’t qualify for a policy, can’t keep up with the premiums, or simply waited too long and have now found yourself in need of care with no coverage, you still have several other options you can consider. As with all financial choices, each has its benefits and drawbacks. It’s important to weigh these options carefully and think about how your choice fits into your overall financial plan.
Savings
You may simply pay for care out of pocket, but if you plan to do so, you need to be sure you can keep up with the payments. Dipping into money you had planned to withdraw from to cover ordinary expenses could drain your savings quickly. If you choose to go this route, consider earmarking a portion of your savings to cover long-term care in retirement. If you qualify, placing this money in a health savings account can help even more.
Home Equity
Many retirees who are within the demographic most likely to need long-term care choose to pay off their homes before retirement. You can tap into this equity to cover things like long-term care. This can be a great tool in the right circumstances, but it’s incredibly important that you understand the possible risks.
Annuity or Life Insurance LTC Rider
Annuities are insurance products designed to provide a guaranteed income stream, often for life. Like other insurance products, you can modify your contract through policy options called “riders.” One possible rider is an LTC rider. If you purchase this rider, your payout will increase when the qualifying conditions are met. You may still be able to qualify for an LTC rider even if you were denied coverage under an LTC policy.
Some life insurance policies will also allow you to purchase an LTC rider. These policies may give you access to a portion of your death benefit to pay for care while you’re still alive.
Medicaid
Medicaid—not to be confused with Medicare, which does not cover LTC—covers long-term care, provided you qualify for it, but this program is intended for low-income individuals and families. The specific limits vary by state, but recipients are generally limited to just a few thousand dollars in assets. However, proper planning starting several years in advance could help you qualify.
Tips for Qualifying for LTC Insurance
Being proactive about long-term care insurance can help improve your odds of approval and even affect your cost. Here are a few things to consider:
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Apply early: The most important factor is applying for a policy before you need it and while you’re still healthy enough to qualify.
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Get your health in order: Many aspects of your health that will affect your application are within your control, such as maintaining a healthy weight and avoiding tobacco and alcohol.
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Keep accurate records: Your insurer will ask for medical records and may have additional questions. Providing them with accurate and complete information will help the application process go smoothly.
Key Takeaways
Most adults will need some amount of long-term care during their lifetime. This can be expensive, but long-term care insurance can help provide protection from the financial strain of paying for it. However you account for the possibility of needing long-term care, it’s important to plan ahead and consider that need before it arises.
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