For many Americans, buying insurance to cover your home, car, and health is standard practice. But long-term care insurance is a mystery to many, even if it provides important financial protection against certain life uncertainties.
The purpose of long-term care insurance (LTC) is to protect the policyholder from paying the full bill of an extended stay in a healthcare facility, such as a nursing home or rehabilitation center.
Because it is uncertain whether you will need long-term care in the future, and the costs could be very high, it is worth learning more about your long-term care insurance plans and making an informed decision .
You may need specialized care at a later point in your life. For example, as you get older, your doctor may discharge you to a nursing home after being hospitalized for surgery or illness. Fortunately, Medicare covers qualified stays up to 100 days. However, sometimes a deterioration of mental or physical health due to an accident, illness or dementia leads to a longer stay in a nursing home or long-term home care. When this happens, even families in good financial position may have to weigh the costs of long-term care against their other priorities.
Although Medicaid covers the cost of long-term care beyond 100 days, this federal program requires individuals to exhaust their personal savings first, among other qualifications. For this reason, even individuals who are financially comfortable should carefully consider long-term care insurance.
Here are some factors to consider when considering long-term care insurance:
· Your age and health may affect your eligibility. Purchasing a policy when you are relatively young and healthy may mean that you have more years to pay, but it also helps you secure a benefit that may not be available if you are older or in the event that you experiencing health problems. The cost of a policy usually increases with age, especially after age 60, when health problems become more common. If you have a pre-existing condition or a family history of a condition, you may not be eligible to take out certain policies. Check the fine print carefully to see if any conditions are excluded from coverage.
Long-term care insurance comes in many forms – from barebones to all the bells and whistles. Price is just one factor to consider. Compare parts of the policy side by side to see which plan may make sense for you. Evaluate facilities and programs in your area so you can align your service expectations with what different policies can cover.
· Most plans are linked to the need for help with a predetermined number of daily living activities (ADLs), such as dressing, showering and eating. You pay more if you want a policy that requires fewer concurrent ADLs to generate benefits.
· Consider the cost of nursing homes in your area to determine whether to buy coverage on the high or low end of the spectrum. Choose a daily benefit – or the amount of expenses covered each day – that you can live with, because you are expected to make up the difference.
· Most plans have an elimination period, which is the amount of time that must pass before your insurance covers the bill. This “gap” in benefits ranges from 30 to 180 days. You are responsible for 100 percent of the costs before your benefits start.
Inflation Protection is a common plan that can help offset rising health care costs by increasing your eligible lifetime benefits under the plan. It’s worth considering whether you can afford the cost of a more generous lifetime limit.
Your financial advisor can help you calculate whether your projected future income and assets can withstand the costs of long-term care, should the need arise. When in doubt, long-term care insurance can make sense. Together, you can review your options and choose a plan that will help you achieve your long-term financial security goals.