The Basics of Long-Term Care Insurance

With nursing home long-term care costs running between $70,000 and $100,000 annually, it is surprising to learn that many American senior citizens do not own insurance to cover the high cost of this care. Americans are living longer; however, this does not necessarily equate to living independently longer. If a chronic illness or disability occurs later in life, nursing home care may be required.

When You Begin Shopping for Long Term Care Policies

Health, life and disability insurance won’t pay for nursing home care. Medicare will cover very little. Long-term care insurance will. Long-term care usually involves non-medical help with daily tasks like bathing and dressing.

Those of us who do not want the government, through Medicaid, to choose our nursing care home; having a long-term care insurance policy is a good option. The premiums for long-term care insurance are not nearly as costly as the average $100,000 out-of-pocket per year cost for long-term nursing home care. Long-term care insurance allows individuals to choose their nursing home care facility and the amount of care they desire.

Comparison-shopping for long-term care insurance is encouraged. Depending on the desired level of care, and age at the time of purchase, the policy and annual premiums can range from $1,000 to $6,000. Premiums increase as we age and as our health starts to wane. Buying long-term care insurance while in our 50’s can lead to a lower rate throughout the entirety of the policy.

When do Long Term Care Benefits Start?

Once a long-term care policy has been purchased, benefits become available, typically, after the following criteria have been met:

  1. You are unable to perform two of six basic activities of daily living (such as bathing or dressing), or you show signs of severe cognitive impairment, such as those associated with dementia.
  2. Your doctor or other health professional certifies that your condition is expected to last at least 90 days.
  3. You pay for long-term care services for the number of days in your waiting period.

Then, depending on the beneficiary’s condition and terms of the policy, care proceeds through several stages.

  • Skilled care. This is medically necessary care provided by licensed professionals, such as nurses and therapists, working under the supervision of a doctor.
  • Intermediate care. This also requires supervision by a physician and skilled nursing care, but it is needed only intermittently.
  • Custodial care. This covers nursing home services. Benefits cover mainly room and board plus payments for assistance with the activities of daily living.
  • Home health care. Depending on the policy, benefits for home health care may range from homemaking and chore services to occupational therapy and laboratory services.

Long Term Care Benefit Period – How Long is Long Enough?

While shopping for your long-term care policy, understand that most people who have purchased long-term care policies wished they had purchased more coverage. One’s current budget and how a long-term care policy fits into it can be a challenging decision for many.

As you search for long-term care insurance you may consider at least a three-year benefit period, which would cover the average nursing home stay (which is about 650 days). You also may want to seek out a policy that covers care in a location suitable to your needs: at home; in an assisted living facility; in a nursing home.

What is the type of care you will want? What can you afford? A big decision when seeking long-term care insurance is to determine how big a daily benefit you need. Find out what the average daily costs are for care in your area according to the level of care you may require so that you do not fall short in the coverage you select. To do this check out prices for facilities in your area you would consider using. Then figure out how much of the bill you could afford by yourself.

Next you will want to know how the policy deductible is satisfied. A policy with a 90-day elimination period, for example, means you’re willing to pay out-of-pocket for the first 90 days of care. You may save money by finding a policy that will credit you for an entire week if you pay for care at least one day a week. Ask insurance carriers about this. To keep premiums manageable and limit out-of-pocket expense, you may consider a 60-day or 90-day waiting period.

Cost Protection and Age Forecasting for Long Term Care Insurance

It is also important to know if the carrier offers policy cost protection regarding inflation. Of course, you’ll want to make sure the policy purchased will stand the test of time and inflation, providing you with long-term daily care when you need it. The best inflation-protection coverage automatically increases your benefit amount by 5% compounded annually, keeping pace with the rising cost of health-care. Such policies are pricey, often doubling the cost of coverage, but your premiums will remain the same even as the benefit amount increases. It will also assure you protection as costs rise.

Again, it is important to purchase long-term care coverage that will adequately meet your needs in the years to come. Forecasting at age 50 what type of care you might require down the road can be difficult. Policies with future-purchase options allow you to buy additional coverage over time without medical screening. These plans typically start out costing half as much as policies that automatically increase your benefit amount. However, in some instances, these plans can also end up being more expensive because rates are often determined by your age at time of purchase.

Please note if the policy you are considering excludes any medical conditions. Some long-term care policies carry exclusions for preexisting conditions, which usually won’t be covered for six months or a year after a policy is in force. Pass up any policy that excludes “mental disorders” unless the seller satisfies you that organically based mental disease is covered.