About Long Term Care Insurance
Long-Term Care Insurance helps you protect your assets and maintain your financial security should you need long-term care later in life. While no one likes to think about the escalating costs of nursing homes and other elder care expenses, planning now can provide you - and your family - peace of mind now and in the future. A long-term care policy provides valuable coverage in the event that daily living assistance is required.
What is Long Term Care Insurance?
Long Term Care Insurance is an agreement between you (the insured) and an insurer. Generally, the insurer promises to pay a daily benefit toward the cost of long-term care (nursing home care, home health care, etc.) in exchange for your premium payments. Long Term Care Insurance is a fairly new product, and is typically less standardized than products such as homeowners or auto insurance. As a result, there are many differences between available policies.
Why do you need it?
Recent studies indicate that 40 percent of Americans over age 65 will need nursing home care at some point during their lives. With Americans living longer every year, this figure will certainly increase. The national average cost of a year in a nursing home is estimated at over $45,000; with some areas having costs twice that amount. Nursing home care is not covered by regular health insurance, and Medicare covers only minimal nursing home expenses. Consider, also, that 90 percent of long-term care services are provided outside of a nursing home setting: in homes, adult day care centers, assisted living facilities, etc. Medicare provides little or no coverage for these types of care.
What you need to know
What it covers
Most Long Term Care provide coverage for the following types of care:
- Skilled nursing care�nursing and rehabilitative care that is required daily. The care must require a skilled practitioner in order to qualify.
- Intermediate care�nursing and rehabilitative care that is required occasionally and performed by a skilled practitioner.
- Custodial care�doctor ordered assistance for an insured's activities of daily living. The person giving the assistance does not have to be licensed or skilled.
- Home health care�custodial or intermediate care that is performed at the insured�s home. Adult day care�provides coverage for �true� adult day care facility or in-home care.
- Respite care�allows family members who are acting as the primary care giver to take a day or weekend off by paying for temporary care.
What it doesn't cover
All long-term care policies contain certain limitations and exclusions, because a policy that covers every conceivable condition and type of care would carry astronomical premiums. Although the specific limitations and exclusions you will find in any given policy vary, the following items are excluded from coverage under most long-term care policies:
- Alcoholism Drug abuse
- Care necessitated by an act of war
- Care necessitated by an intentionally self-inflicted injury
- Certain mental and nervous disorders
- Care provided outside the US and Canada
Some insurers place some type of limitation on care related to a preexisting condition (a problem you had before you purchased the insurance). For example, you may have to wait a certain length of time (e.g., six months) after purchasing insurance coverage before the policy will pay for care of the preexisting condition. Other insurers have done away with this hurdle, and will cover a preexisting condition if it is not serious enough to cause them to reject the insurance application.
When benefits are available
Most policies require you to satisfy one of the three conditions below, before benefits are paid.
1. The need for long-term care is demonstrated by the inability to perform a specific number (defined within the policy) of the "activities of daily living" - such as bathing, dressing, toileting, transferring (from bed to chair), eating, and continence
2. Long-term care is needed due to cognitive mental impairment (such as Alzheimer's disease)
or
3. Long-term care is medically necessary and prescribed by a doctor.
In the past, Long Term Care policies typically required a hospital stay before paying nursing home benefits, but this is no longer true.
When to purchase
If you're between the ages of 40 and 84, there's no time like the present. (Most insurers do not write policies for individuals under age 40 or over age 84.) Long-term care insurance is not for everyone, but if you do decide to purchase it you can save a significant amount of money by buying sooner rather than later. Premium costs rise dramatically if you wait until you're older to purchase a policy, because the likelihood that you'll need long-term care is directly related to your age. As an example, a 65-year-old purchasing Long Term Care Insurance may pay three times more than a 50-year-old would pay for a policy providing the same benefits.
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