With age comes the increasing dependence on assistance for daily activities. An important part of all this is long-term care which encompasses a variety of services intended to assist those with chronic illness or disability. But long-term-care services can come at a price, and without planning, the price may be steep. That’s where long-term care insurance (LTCI) enters the picture.
Long-term care insurance is a type of insurance policy that helps pay for the costs associated with long-term care services, like nursing home visits, home health care, and other types of assistance that allow people to get help with daily living tasks.
What is long-term care insurance?
Long term care insurance is an insurance policy developed to cover the costs of services and support needed when an individual has chronic illness, disabilities or other health problems. They can help with eating, bathing, dressing or taking medications and can be provided in nursing homes, assisted living facilities or even at home.
Long-term care insurance is different from typical health insurance or Medicare, as it helps pay for the nonmedical costs of care and includes more than basic coverage for those who need long-term assistance with their everyday needs.
What is Long-Term Care Insurance and Why Do You Need it?
You may be wondering why you need long-term care insurance. The primary reason: Long-term care is expensive and growing in cost. These services can quickly deplete your savings or shift the burden of care onto family members, without adequate coverage.
Long-term care costs are increasing and are projected to rise for the foreseeable future. Nursing home prices range between $200 to $500 a day based on location and level of care needed, according to reports. For many people, the prospect of paying out of pocket for months or even years of care can be daunting.
The Unpredictability of Needs: Did You Know Long-Term Care Is Not Just for the Elderly? Older people are not the only ones who might suffer serious injuries, illnesses or disabilities that may require long-term care. People with chronic illnesses like stroke, dementia or Parkinson’s disease, for example, might need care well before they enter their golden years.
Medicare and Health Insurance Restrictions: Medicare, the federal health insurance program for those ages 65 and older, covers only short-term skilled care, and it doesn’t cover custodial care (the type of care needed for day-to-day activities). That means you will probably need some other type of coverage, such as long-term care insurance, to help cover the difference.
Care Without Depleting Your Savings & Assets: In the absence of long-term care insurance, you may find yourself depleting your savings or selling off assets to pay for your care. LTCI is a way to protect your financial stability and assets so that you don’t go broke in a healthcare crisis.
Peace of Mind: Long-term care insurance offers peace of mind knowing you have a solution in place. It also safeguards you at the next stage, ensuring that you have the resources to face future health struggles, should they arise, without relying on your children or making hard financial choices.
What Does Long-Term Care Insurance Cover?
Long-term care insurance typically covers a variety of services that help with daily activities for those who cannot do so on their own. Below are examples of common services included in a long term care insurance policy:
Nursing Home Care: Long-term care insurance pays for skilled and custodial care received while in a nursing home. This type of care is often for those who need round-the-clock supervision due to chronic disease, injury, or disability.
Assisted Living Facilities: A lot of policies will also cover people receiving care in an assisted living facility where the individual may need help with activities of daily living (known as ADLs) such as bathing, dressing, and taking medication but do not need continuous skilled nursing care.
Home Health Care: If you want to receive care in your home, a long-term care insurance policy can pay for home health services. Those services may involve help with daily tasks, home visits by registered nurses and medical care that does not require the hospital setting.
By the way, once you are of the age, certain long term care policies also cover adult day care services which allow you to visit their center during the day when your loved ones are at work or are unable to care for you.
Hospice Care: If someone is reaching the end of life, long-term care insurance can help pay for hospice services, ensuring those in their final days have both comfort and care for their family as well.
Caregiver Training: Some policies may cover the cost to train family caregivers who care for a loved one at home about how to address medical needs and provide appropriate support.
Respite Care: Long-term care insurance may also cover respite care, which enables family members serving as caregivers to take a break and rest.
How Does Long-Term Care Insurance Work?
Long-term care insurance pays you a defined number of benefits for long-term care services when you need them for assistance with activities of daily living (ADLs). Here’s how it usually goes:
Premiums: Long-term care insurance involves paying premiums (monthly, quarterly, or annually) to the insurance provider for coverage. These premiums depend on various factors, including your age, health, how much coverage you want and the policy’s waiting period.
Elimination (Waiting) Period: Most policies have an elimination period, a waiting period before benefits start.
Benefit Period: After you qualify for coverage, long-term care insurance pays your costs for a designated benefit period. Depending on the policy, the benefit period can last from a few years to a lifetime. The premium increases the longer the benefit period.
Everyone can benefit from long-term care insurance, but a few factors help determine the need for long-term care insurance. This maximum is the most the insurance company will cover for your care on a daily or monthly basis. You select a limiting benefit based on anticipated care needs.
Typically, you’ll need to meet certain criteria to qualify for benefits. This typically includes a medical evaluation, whereby you are deemed unable to perform at least two ADLs (such as eating, bathing, dressing, toileting, and transferring) or requiring supervision due to cognitive impairment (such as dementia).
Which Long-Term Care Insurance Policy Is Right For You?
Married couples can have an insurance policy on each other, so make sure that in the long run, you end up with the policy device that is right for you. Here are some factors to consider when choosing a policy:
Age and health: Long-term care insurance is most cost-effective when purchased at a younger age while in good health. But buying coverage too early could result in paying premiums for many years without needing benefits. In your 50s or 60s, buy coverage that provides balance.
How Coverage Works: Know how coverage works. Decide if you want a plan that pays only for nursing home care, or if you want a more comprehensive policy that includes home care, adult day care, and other services.
Exclusive and Plan Restrictions: Pay attention to the cost of premiums and the limits placed by the plans on benefits. You want the benefits to be sufficient to meet your likely long-term care needs, while also ensuring that premiums will be affordable through the years.
At this point, it is important to mention about the Elimination Period: The elimination period is the time you must wait for benefits to kick in. A shorter waiting period means higher premiums; a longer waiting period typically means lower premium but more money out of your pocket.
Inflation Hedge: Costs for long-term care usually increase over time because of inflation. Look for a policy that offers inflation protection, a feature that increases the daily benefit amount over time so it keeps pace with growing care costs.
Provider Reputation: Look for an insurance provider with a strong reputation for customer service and financial strength. Do research reviews, financial ratings, and customer experiences before proceeding.
Conclusion
As we age and the risk of needing help with daily living activities rises, long-term care insurance becomes an integral part of future financial planning. It offers financial protection, asset preservation, and peace of mind knowing that you are prepared if you ever need long-term care.
Knowing what long-term care insurance covers, how it works, and how to find the right one can help you make an informed decision that’s right for you. Long-term care insurance so preparation allows you to have peace of mind knowing that you are more well prepared for any potential challenges you may face in the future, and allows you more focus on your health and well-being rather than financial strain.
