[Practical Finance] Era of 10 Million Elderly... Tips for Joining 'Ganbyeong Insurance'

Popularity of Caregiving Insurance as a Supplement to Long-Term Care Insurance
Carefully Consider Caregiving Costs and Renewal Options
If There Is a Family History, Also Consider 'Dementia Insurance'

This month, the population of elderly people aged 65 and over in South Korea is expected to exceed 10 million. As the proportion of elderly people surpasses 20% of the total population, entering a super-aged society, interest in long-term care insurance for healthy old age preparation is increasing. Insurance companies are also steadily developing the related industry by competitively introducing new products with unique riders.

Long-term Care Insurance: A Pillar for a Super-Aged Society

In South Korea, health insurance enrollment is mandatory. Among health insurance types, there is long-term care insurance. If a person aged 65 or older, or under 65 with elderly-related diseases (such as dementia, cerebrovascular disease, Parkinson's disease), applies for long-term care certification, they are classified into grades 1 to 5 or a cognitive support grade (grade 6) depending on the severity, and receive assistance accordingly. However, due to over-treatment and aging, health insurance finances are expected to turn into a deficit starting in 2026, raising ongoing concerns that it may be insufficient to fully guarantee a secure old age.

As an alternative, long-term care insurance offered by insurance companies is gaining attention. This insurance provides funds for caregiving or living expenses if the insured enters a long-term care state or has difficulty with daily activities due to dementia, etc., during the insurance period. The average caregiving cost in South Korea is about 130,000 KRW per 24 hours, amounting to approximately 4 million KRW per month. Even if one receives grade 1 long-term care benefits from the government, home care benefits are about 2.07 million KRW as of this year. The remaining costs must be borne by the patient. This is why long-term care insurance is necessary.

Long-term care insurance is divided into 'general long-term care insurance,' which pays lump sums and home or facility care benefits upon receiving a long-term care grade, and 'caregiver insurance,' which supports caregiver services regardless of the grade. Caregiver insurance is mainly divided into two types: 'caregiver support daily allowance' and 'caregiver usage daily allowance' (caregiving expenses). The support daily allowance is a product where the insurer sends caregivers directly through affiliated agencies. It has advantages such as not needing to hire caregivers directly and being unaffected by rising caregiver wages. However, all products are renewable, so premiums may increase. The usage daily allowance allows customers to hire caregivers individually and claim receipts to the insurer to receive a fixed caregiving fee. It can be subscribed as non-renewable and allows choosing the desired caregiver directly. However, even if wages rise, additional coverage beyond the subscribed amount is not provided.

Precautions When Subscribing to Long-term Care Insurance

When is the best time to subscribe to long-term care insurance? Most health insurance policies have lower premiums and lower chances of rejection when subscribed to while young and healthy. Insurance agents generally recommend subscribing as early as possible. However, since insurance companies recently have been competitively launching products with new riders at affordable premiums, there is no need to rush. An industry insider explained, "For oneself, people often subscribe in their 50s or 60s, and for parents, depending on whether they live alone and family relationships, subscriptions in their 60s or 70s are common. By reducing the maturity age from 100 to 90 or choosing renewable types and cutting some riders, premiums can be significantly lowered to under 50,000 KRW."

Recently, 'long-term care insurance payback riders' have become popular. Meritz Fire & Marine Insurance introduced a payback rider in its long-term care insurance launched this week, which pays back half (1 million KRW) if 2 million KRW is spent on caregiver costs. After first introducing a payback rider in May that refunded 1 million KRW when 5 million KRW was spent on caregiving expenses, the payback criteria were significantly lowered within two months. DB Insurance also sells a rider that refunds 1.5 million KRW when caregiving expenses exceed 3 million KRW.

The 'increasing benefit' type, which raises insurance payouts over time, is also a trending product. It was developed anticipating a 'caregiving crisis' where many patients exist due to aging and low birth rates, but caregivers are insufficient, causing caregiving costs to soar. Choosing the increasing benefit type can reduce the burden of rising prices and wages. KB Insurance offers a rider that compensates caregiver usage daily allowances with a 10% increase every five years based on the initial subscription amount. Samsung Fire & Marine Insurance and Meritz Fire & Marine Insurance also have similar product lines.

Premiums also vary depending on whether the long-term care insurance is a simplified disclosure type or a health disclosure type. The simplified disclosure type has fewer disclosure items than the standard type, meaning fewer disease histories to report. It allows people with high-risk chronic diseases to subscribe but has higher premiums. The health disclosure type has more disclosure items than the standard type, requiring more disease history reporting. It targets lower-risk (healthier) subscribers from the insurer's perspective. Although the disclosure process is more complex and subscription is more difficult, premiums are lower.

If There Is a Family History, Prepare 'Dementia Insurance' in Advance

Dementia insurance is another insurance worth noting amid aging. Dementia insurance pays benefits in the form of diagnosis fees or caregiving expenses when diagnosed with dementia. Dementia insurance determines the severity of dementia?mild, moderate, or severe?based on the Clinical Dementia Rating (CDR) conducted by dementia specialists or long-term care grades, and pays benefits accordingly.

The risk of developing dementia increases with age, especially after age 80. According to the Central Dementia Center, 60% of dementia patients aged 65 and over are 80 or older. When subscribing to dementia insurance, it is essential to check whether the product covers beyond age 80. Recently, some dementia insurance products provide coverage up to 110 years old, beyond 100 years.

Among types of dementia, Alzheimer's disease is the most common, accounting for about 60% of all dementia patients. Most cases occur sporadically, but about 5-10% are related to genetic factors. If a direct family member has Alzheimer's disease, the risk of developing it increases 2 to 3 times. It is advisable to recognize this in advance and prepare insurance accordingly.