About Long-Term Care Insurance
care insurance coverage is available on an individual or group
basis to provide medical and other services to patients who
need constant care in their own home or in a nursing home..
are most often living longer but many need assistance in their
later years. Long Term Care services can be provided in your
home, in an assisted living facility or in a nursing home.
In many cases the family is no longer able to provide such
care around the clock. Family members may not live nearby,
they may have other pressing family commitments, or simply
cannot get the time off work or away from the home
people need help with activities that many of us take for
granted - eating, bathing, dressing, and so on. The Health
Insurance Association of America says that 48.6% of people
age 65 and older may spend some time in a nursing home and
71.8% of people age 65 and older may use some form of home
health care. Below 2% of nursing home costs are paid by Medicare
and the national average nursing home cost is estimated at
$40,000 per year.
can afford Long Term Care costs out of pocket, others will
qualify for Medicaid (welfare), but the majority of us will
fall somewhere in the middle. We have worked hard all our
lives and now could spend it all on a nursing home.
Long Term Care Insurance Policy can help protect your assets
from the rising cost of care, allowing you to remain financially
secure and independent. Long Term Care can help secure not
only your financial future, but also that of those you love.
any form of insurance can be a very intimidating process,
but a little help can make purchasing a long term care insurance
policy easier. Always discuss insurance purchases with a trusted
of the most important considerations is the choice of insurance
companies. The financial strength of an insurance company
is very important and a good indicator of a company's ability
to pay it's claims. Several well known companies that rate
insurance companies are:
A. M. Best
Daily Benefit and Elimination Period
daily benefit of a long term care insurance policy is the
money benefit that the insurer will pay to the nursing home
expresses as a daily amount of coverage. Long Term Care Insurance
policies can typically be designed with this figure ranging
anywhere from $50 to $300 per day. Naturally choosing a larger
daily benefit will cause the policy premium to be higher.
elimination (or 'waiting') period of a LTC policy is essentially
used as a form of a deductible. A normal waiting period is
either 0, 7, 20, 50, 60, 90, or 100 days. Choosing a longer
waiting period is an easy way to lower the premiums of a policy.
design a good long term care policy you should determine how
much cash or semi-liquid reserves you have or are willing
to apply to long term care. At this writing the nation's average
cost of long term care is close to $138 per day and inflation
runs between 3% and 5% each year. Hypothetically, an average
4% inflation rate increase each year means that daily LTC
care costs will be:
per day in 5 years from now
per day in 15 years from now
per day in 25 years from now
estimating how long before it may be before you need long
term care, determine the assets you have to pay for long term
care. You must decide how much you are willing to spend for
this care. Using this figure and the information above you
can intelligently decide how long a waiting period and how
much daily benefit your long term care insurance policy should
Benefit Period and Determination
The benefit period is the maximum amount of time that the
insurer will provide the daily LTC benefit. It can range from
2 years, 3 years, 4 years, 5 years to a lifetime. The lower
the number of years the lower the policy premium. It's usually
best to choose as long a benefit period as you can realistically
major consideration in Long Term Care policies is how the
insurer determines when benefits start. Most insurers use
an "ADL" or Activities of Daily Living method. ADL's
are things like bathing, dressing, eating, and toileting.
Using ADL insurers will pay benefits after it is medically
documented that the insured cannot perform a predetermined
number of ADL's but each insurance company may have a different
set of ADL's. Each policy also requires assistance with
a specific number of ADL's before the policy benefits will
be paid. Consider choosing a LTC policy that provides coverage
when aid is needed with only 2 ADL's so that the insured receives
the necessary treatment. Some policies allow benefits to begin
if a cognitive impairment exists, such as Alzheimer's disease.
Optional Policy Riders or Provisions
are several optional riders available for long term care policies.
Protection compensates for typical cost increases in long
term care by increasing the daily benefit amount. There are
several methods in which the benefit can be increased: yearly
simple 5% increase, yearly compounded 5% increase, or even
an increase based on the consumer price index. This rider
provides for partial return of premiums or a reduced paid-up
policy in the event of policy lapse due to nonpayment.
home health care, adult day care, or assisted living centers,
consider a Home Health Care rider. Normally the benefit is
a percentage of the daily nursing benefit ranging from 50%
to 80% to a full 100%.
obvious reasons Waiver of Premium riders are fairly common,
allowing the policy to remain in force as if premiums were
being made once a patient is receiving the benefit.
this guide is intended to aid in the purchase of a long term
care insurance policy, there are possibly issues that may
not have been addressed. Please consult with a trusted advisor
prior to the purchase of a policy.