Insurance for old age is an important consideration for seniors and their caregivers. Seniors typically have a lower family income than non-elderly individuals; at the same time, their health care costs and long-term care needs are often growing. Even with adequate medical coverage, out-of-pocket costs tend to increase as people age.
Being proactive with insurance coverage – planning ahead, getting coverage before a need, and exploring options – can help make it possible for seniors and their caregivers to maintain quality of life without undue financial strain.
“One of the biggest struggles seniors face is regret from not planning,” said Tom Riekse, managing director at LTCI Partners, an NFP company. “There are two big advantages to advanced planning: insurability due to better health and lower premiums.”
One of the best things you can do as a caregiver is learn about insurance for old age—the policies your loved one already has, what’s included and what additional coverage is needed and available.
Medical insurance for old age
Two key types of insurance for old age are medical insurance and long-term care (LTC) insurance. Medical insurance, of course, provides coverage for health care needs. LTC insurance provides coverage for the costs of long-term care, and can enable family caregivers to get the help they need when caring for an aging loved one. Many people assume that medical insurance will provide coverage for long-term care—after all, long-term care is often needed due to health issues. But the truth is that most health insurance policies provide limited long-term care coverage, if any. Neither Medicare nor Medigap (a supplemental Medicare plan) provide full coverage for long-term care. That’s because long-term care isn’t technically considered medical care. This leaves the financial burden for long-term care on the shoulders of seniors and their caregivers.
What can you expect from medical insurance in old age? Here’s a quick overview:
- Increasing out-of-pocket costs. Even with Medicare, “your out-of-pocket costs could reach well into six-figure territory over the course of your retirement,” explained Sarah O’Brien for CNBC. And while federal regulations have set a cap on insurance premiums, the monthly cost for seniors is still much more expensive than for younger individuals.
- Need for supplemental coverage. Seniors may need supplemental insurance for vision, dental and hearing coverage, which Medicare does not provide.
- You have options with Medicare coverage. Medicare is divided into distinct parts to cover different needs, and you can choose an expanded option (Medicare Advantage) and add supplemental coverage (Medigap). Medicare Advantage may offer some LTC coverage, as well (more on that below). See our tips for caregivers to help seniors navigate Medicare.
Long-term care insurance for old age
Long-term care, according to Medicare, is defined as “a range of services and support for your personal care needs. Most long-term care isn’t medical care. Instead, most long-term care is to help with basic personal tasks of everyday life.” So even though long-term care is often needed for seniors with health issues due to aging, it’s not covered by most health insurance plans or Medicare plans, since it isn’t classified as medical care.
That’s a very frustrating—and expensive—problem for the seven out of 10 people over 65 who will need some type of long-term care. The cost of long-term care frequently greatly exceeds any Social Security benefits. Often, family caregivers and other family members pitch in, but most are not prepared for the financial strain on top of the emotional and physical stress of caregiving.
Long-term care insurance can be a very helpful solution for the cost of long-term care, but waiting too long is a danger. Past a certain age—or once age-related health issues become problematic—insurance costs become prohibitive. In many cases, seniors may not be able to get coverage if they wait too long. “In our experience, approximately 30% of people who apply for long-term care insurance are unable to obtain a policy, with the biggest reason being health issues due to age,” Riekse said. “For those who plan ahead, long-term care insurance can provide substantial help for caregiving.”
Here’s what you need to know about long-term care insurance:
- Get LTC insurance well before it is needed. “From what we see, the average age of Americans who buy LTC insurance is 57 years old,” said Riekse. “Many adult caregivers buy LTC insurance also because they know being unprepared can impact an entire family.”
- Some LTC coverage may be available with Medicare Advantage. There is some good news: recent regulatory changes, said Riekse, may allow for Medicare Advantage (not traditional Medicare) to provide certain home care services. Services could range from caregiver support to meal delivery, “with the goal of keeping beneficiaries at home and out of a costly hospital setting.” Check with your Medicare Advantage provider to find out details on services and conditions for coverage.
- You may qualify for Medicaid coverage of LTC needs. In fact, 20% of Medicaid’s total spending in 2015 was for long-term care. Each state has their own qualifications, and not all states offer coverage for low-income adults. Find your state’s information here.
- You may be able to exchange life insurance for LTC coverage, tax-free. A 1035 exchange is a tax-free annuity exchange which enables individuals to switch out an old annuity or insurance contract for a new contract. There are restrictions, so consult your financial advisor about combination annuity/LTC programs, which, said Riekse, often “have less stringent health underwriting guidelines and the advantage of receiving LTC benefits tax-free.”
- LTC insurance may cover different types of senior housing. In most cases, said Riekse, “Once seniors cannot perform two of six activities of daily living (ADLs) or need supervision due to Alzheimer’s or dementia, benefits will begin.”
A final, important point—even if, as a family caregiver, you are able to emotionally and physically provide all the care necessary for your parent, long-term care coverage can be truly beneficial. “LTC insurance allows the primary caregiver to spend more quality time with a loved one instead of the exhausting physical work that may be necessary for day-to-day life,” said Riekse.
Life insurance for seniors
Once past retirement, some seniors may decide that life insurance is no longer needed, since it’s often used as an emergency replacement for income. However, there may be good reasons to hold onto your life insurance policy.
If a senior still has a spouse or other dependents, then life insurance benefits can help them maintain their lifestyle in the case of the policy holder’s death. If one spouse has a higher retirement income than the other, then maintaining a life insurance policy for the higher-income spouse is a good idea. Life insurance benefits are also useful for other reasons, according to Todd Soltow of Frontier Wealth Management. They can help offset tax expenses, pay off debt, or be put toward long-term care needs for a surviving spouse.
If there are immediate financial needs, life insurance could be used to generate income, via a life insurance settlement. It’s the sale of a life insurance policy to a third party, and typically results in getting more cash than the policy’s surrender value. Anthony Cirillo, president of The Aging Experience, explained that life insurance settlements are “best for clients age 65 or older, but that’s just a guideline. Each client’s situation is unique and personal, and each investor group also has its own unique parameters.” The settlement payment, said Cirillo, can be a good way to “increase retirement income… [or] pay for assisted living, memory care or home care.”
Here are some important points about life insurance for seniors:
- Review any life insurance policies regularly. If the policy is term life insurance, when does the term end? Is there any option to apply the insurance coverage to long-term care? Ask your insurance provider so you know all the benefits and limits of the current policy.
- Watch for spiking premiums. “Rising premiums can soar dramatically as you get older, leaving you with no choice but to cancel the policy,” said Wendy Connick. If that’s the case, then cashing out on a settlement or making a tax-free 1035 exchange may be the best move.
- If cashing out a life insurance policy makes sense, do your homework on life insurance settlements. Get multiple quotes to compare for fair pricing; think about the potential financial impact (a large cash settlement may result in being disqualified from certain forms of aid); and be sure the broker or company is properly licensed in your state. Find more details here on what to look for with life insurance settlements.
- As mentioned above, a life insurance policy may qualify for a tax-free 1035 exchange for long-term care insurance. Depending on the situation, this may be a much better value than any life insurance benefits or the proceeds from selling the policy.
Getting life insurance in old age
For a senior without life insurance coverage, there are more and better options than there have been in the past. Insurance trends show that more companies are developing senior-friendly offers as the aging population grows and life expectancy increases. A life insurance policy purchased over the age of 60 is still going to be more expensive than a policy purchased in the younger decades. However, there are policies with increased age limits and no medical exams required. Connick recommends sticking with the simplest policy available to limit fees and commissions, with the exception of a hybrid life/long-term care policy. Just focus on a policy with a fixed premium.
Here are our top recommendations for life insurance for seniors:
- Mutual of Omaha
- Age Up
- Ladder
- Haven Life
- Policy Genius
- AIG
- Banner
- MassMutual
- Gerber
- Transamerica
- Prudential
Other insurance needs for seniors
Pet insurance
If there’s a lovable furry member of the family, then pet insurance is worth looking into; it’s a policy like health insurance, but for pets. While it won’t cover existing medical conditions for a pet, most pet insurance policies cover treatment for illnesses or accidents as well as general health maintenance. We’ve done extensive research and reviewed the best pet insurance options. See our top picks here.
Auto insurance
You may need to add yourself—or other caregivers—to the auto insurance policy, if you are regularly using the car to drive yourself or your loved one. There are different requirements for different scenarios; for example, if your elderly parent is no longer driving at all, you will need to be added as the primary driver on the policy. If a parent continues to drive, but you regularly drive as well, you may need to be on the policy as an additional driver.
Home insurance
If there are nurses, health aides or other members of the caregiving team coming frequently to provide in-home care, then the homeowner’s policy may need to be updated with additional liability coverage. You may also find that insurance premiums change if you make significant updates to the house for safer senior care; for example, adding a wheelchair ramp and remodeling a bathroom may increase the home’s value and the insurance rate. Document all updates and talk to the insurance provider to find out what affects the policy.
How caregivers can help with insurance for old age
As a family caregiver, you may provide help with daily activities as well as financial caregiving. If so, you will be an important part of helping your loved one deal with insurance needs. “Seniors who are Medicare-eligible should conduct annual reviews of their Medicare options,” Riekse advises. They may need your help to do so; keep insurance policies on hand and review coverage carefully.
You can also help in these ways:
- Keep insurance payments one time
- Review insurance policies regularly
- Document health conditions or other needs pertinent to insurance requirements
- Find in-network providers for care
- File and follow up on insurance claims
- Ensure that professional caregivers and agencies have appropriate insurance coverage
Insurance for caregivers
Family caregivers—especially those who are the sole caregiving providers—may want to purchase additional insurance coverage to protect themselves and their loved ones:
- You may wish to add your senior parent as a beneficiary on your life insurance policy (or purchase an additional life insurance policy for this purpose). In the case of your death, your senior loved one could use the life insurance benefits to help pay for their long-term care.
- If your parent is living with you, and others are providing care in your home, you may need to increase the liability coverage on your homeowner’s policy.
- Ensure that you have adequate health care coverage for yourself; caregiving takes a mental, emotional, and physical toll and it’s important that you have the resources on hand to take care of yourself.
Final thoughts
While insurance can be an overwhelming topic, it’s an important consideration for caregivers and seniors. Being proactive is the best way to handle insurance needs. The sooner you examine the options and get the best coverage lined up, the better. Being proactive about policies already in place is helpful, too. When in doubt, call your insurance provider and get details about the benefits, limitations, costs and options. The more you know, the better equipped you are to ensure that you and your loved ones have the best possible care.
