Long-Term Care Insurance Basics
Long-term care is expensive, and this type of insurance can help you pay for some or all of the services provided by long–term care.
Statistics suggest the majority of us are going to need to be on the receiving end of what's usually called long-term care during the "golden years" of our lives.
Information published by the US Department of Health and Human Services says that a person turning age 65 today has a 70 percent chance of needing long-term care service or support late in life.
Which means, unfortunately, that a good portion of us are going to spend a lot of cash on health care after we reach, and then pass, a certain age.
After all, spending any amount of time in a skilled-nursing facility these days costs a surprising amount of money. A trip to a "nursing home" last year would have set you back somewhere around $212 and $240 per day. The cost depends on where it's located and whether you stayed in a private or semi-private room, according to the Genworth 2014 Cost of Care Survey.
Other long-term care situations aren't much better. The national median monthly rate for an assisted living community comes in at $3,500. That's about $116 a day. Adult day health care centers charge an average of $65 per day. Home health aides earn approximately $21 per hour. And homemaker services costing about $19 an hour.
What's Covered and How It's Covered
There are several ways you can pay for all of this care, of course. One option is to pay for it out of your own pocket, using current income or cash you've saved over the years. Two other options are Medicare, the federal program that provides hospital and medical insurance to people who are 65 or older. The other is Medicaid, which assists those with low incomes or limited resources.
Long-term care insurance is another possibility. Depending on the kind of policy you buy, this type of insurance can help you pay for all, or just some, of the care mentioned earlier. It can also cover some or all of the costs associated with care coordination and home modification.
Benefits usually are paid by the day, week, or month. An example: your policy may pay up to $215 per day for skilled-nursing care, or $1,500 per week, or $5,000 per month. For home care, it might pay just a portion of the above—such as $100 or so a day.
These benefits don’t pay out forever, though—or at least most of them don't. The majority of long-term care insurance policies place limits on how much they'll cover. They also limit how long (a specific number of years—up to a lifetime) they'll provide coverage.
It's important to carefully consider any limits or caps in a policy you may be considering, as well.
What's Not Covered
Something else you'll want to consider while shopping around for long-term care insurance: anything that isn't covered by an in-consideration policy.
For instance, a policy may not cover certain conditions or situations. In terms of conditions, a policy may not cover you -if you had a stroke in the last couple of years or if you have a history of strokes.
A policy also may not cover you if you have AIDS or AIDS-Related Complex (ARC), Alzheimer’s Disease or some other form of dementia or cognitive dysfunction, or a progressive neurological condition like Parkinson’s Disease or multiple sclerosis.
Long-term care insurance policies may not cover care that's provided by family members either, although some will pay for family members to be trained as caregivers.
How Long-Term Care Insurance Works
Before your long-term care insurance policy will begin to pay out, you'll likely have to meet a couple of requirements.
One of those requirements revolves around something known as a benefit trigger. In most cases, these are tied to Activities of Daily Living (ADLs) or cognitive impairments. This means you must be unable to perform a certain number of ADLs without assistance before you "trigger" your benefits. Some ADL examples are bathing, dressing.
You and your loved ones don't determine if a benefit trigger has occurred, by the way. This is done by a nurse or social worker (who's often sponsored by the insurance company) after completing an assessment.
Once it's been decided that you have, in fact, triggered your benefits, you enter what's called the "elimination period." This refers to the number of days that must pass before your policy begins to pay. (In other words, your benefits begin on the day after your elimination period ends.)
Your elimination period could last anywhere from zero to more than 100 days. Shorter elimination periods usually mean higher premiums, while longer elimination periods usually mean lower premiums. But going with a longer elimination period means you'll pay for your health-care expenses out of pocket for a longer period of time before your policy kicks in.
There's something else to keep in mind regarding elimination periods. Some long-term care insurance policies only have one elimination period attached to them. But others attach elimination periods to each separate incident that requires care.
Where to Buy Long-Term Care Insurance
There are a lot of options when it comes to where you can purchase a long-term care insurance policy. Here are some of the most common:
Depending on where you work, your employer may give you access to group long-term care insurance policies or even individual long-term care insurance policies. This is true even if you work for the federal government or some state governments.
There can be some real benefits to taking advantage of these offers. One of them is that you may not have to meet medical requirements to qualify. Also, it's possible your family members will be allowed to take advantage as well, although they may need to pass certain medical screenings or tests first.
Insurance Agents or Brokers
Two things to keep in mind if you do what most people do and turn to an agent, broker, or financial planner when it's time to buy one of these policies:
- Check to see if the agent, broker, or financial planner you're considering working with has been trained in long-term care insurance (this is required in some states)
- Contact your state's Department of Insurance to make sure he or she is licensed to sell this kind of insurance
It isn't unusual for professional or service organizations or associations to offer group long-term care insurance policies to their members.
If you go this route, make sure you read the fine print. You should be fully aware about what will happen if you stop being a member or if the coverage is terminated. (This same piece of advice should be followed for employer-sponsored policies, by the way.)
State Partnership Programs
People who live in certain states can buy special long-term care insurance policies that are linked to Medicaid. Specifically, these policies allow you to keep a set amount of assets while still qualifying for Medicaid. (For more information on State Partnership Programs, visit longtermcare.gov.)
Other Things to Consider Before Buying this Type of Insurance
Whether you should buy long–term care insurance depends on your age and life expectancy, gender, family situation, health status, income and assets.
- The younger and healthier you are when you buy long-term care insurance, the less it will cost
- On a related note, if you wait until you're older or have a serious health issue, it could cost a lot more. And that's assuming you can get it at all
- If you're a woman, you may want to give special consideration to this kind of insurance. That's because you're likely to live past your 80th birthday
- Another reason you may want to strongly consider long-term care insurance: if your family has a history of chronic or debilitating health issues
- If someone can care for you at home, it might make more sense for you to limit your choices to long-term care insurance policies that focus on skilled-nursing care
- Although insurance companies can't increase rates on an individual basis, they can increase them on a broad level—such as on a class of similar policies in your state
- Companies can't cancel your long-term care policy unless you fail to pay your premiums or used up all of your benefits. They can also dump you if you lie on your application
- You can cancel your policy at any time
- Understanding Long-Term Care Insurance
- Genworth 2014 Cost of Care Survey
- What is Long-term Care Insurance?
- Long-Term Care Insurance: What You Should Know
- A Shopper's Guide to Long-Term Care Insurance
- Longtermcare.gov - Long-Term Care Information
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