Long-Term Care Insurance
Americans are living longer than ever. As life
expectancy increases so does the number of people requiring long-term
their later years. According to the U.S. Department of Health and Human
Services (HHS) about 12 million of the nation’s senior citizens
long-term care by 2020. The cost can be a huge financial strain on
family budgets. Long-term care insurance may make sense as part of your
financial planning strategy. The following tips and considerations are
provided to help you determine whether
long-term care insurance is right for you.
is long-term care insurance?
Long-term care (LTC) refers to a wide range of medical, personal and
services. Someone with a prolonged physical illness, a disability or a
cognitive impairment such as Alzheimer’s often needs specialized
services may include help with daily activities, home health, respite
hospice care, adult day care, or a move to a nursing home or assisted
LTC insurance is designed to help pay for these types of services.
Long-term care insurance will pay for or reimburse policyholders an
(usually up to a daily or weekly limit) for qualified services.
policies cover various benefits and types of care. Most policies have
how long or the total amount they will pay.
How is the cost
With LTC insurance, you pay a premium and then the policy pays for
services when you need them, up to limits in your policy. The cost
the amount and type of care you need and where you get it. LTC
expensive, and your premium may increase.
Some of the cost of your policy is impacted by:
When will benefits be
- Your age when you buy the
- The maximum amount that a
policy will pay per day.
- The maximum number of days
or years that a policy will cover.
- The lifetime maximum
amount that the policy will pay. This is determined by the amount per
day times the number of days over the life of the policy.
- Any optional benefit you
choose, such as benefits that increase with inflation.
LTC policies have an elimination period. This is the number of days you
qualify under the policy for nursing home or home health care before
policy pays benefits. A shorter elimination period means a higher
Elimination periods typically range from 0 to 180 days. In addition,
is not guaranteed until you satisfy certain requirements. For example,
policies require that you be unable to perform a given number of daily
activities, such as dressing, bathing and eating without assistance.
policies further limit payment to qualified services received
consistent with a
coordinated plan of care established by specific individuals under the
Also, most policies have a benefit trigger for cognitive impairment.
example, you may only qualify for these benefits if you are unable to
test assessing your mental functioning.
much in benefits will the policy pay?
Policies normally pay benefits by the day, week or month. You may
benefit period that is a specific number of days, months or years. A
benefit period may range from one year to the remainder of your
lifetime. It is
important to ask if the benefit amounts will increase with inflation,
that coverage increases your premium.
Are there exclusions?
Every policy has an exclusion section. Some states do not allow certain
exclusions. Many LTC policies exclude coverage for the following:
- Mental and nervous
disorders or diseases (except organic brain disorders);
- Alcoholism and drug
- Illnesses caused by an act
- Treatment already paid for
by the government; and/or
- Attempted suicide or
long-term care insurance right for me?
Whether you buy LTC insurance should be considered as part of a
financial strategy. Take into consideration factors such as your age,
status, overall retirement goals, income and assets. It is not a
decision to be
made quickly without consulting those close to you. Many people buy a
because they want to stay independent of government aid or do not want
solely on the help of family. However, LTC insurance policies are
are not likely to cover all
of your LTC needs. Bottom line, you should not buy a policy unless you
substantial resources to guarantee you can afford the premium now and
Some additional things to consider:
- Age and life expectancy:
The longer you live, the more likely it is that you will need
LTC. Do you have family members that have lived a long time? The
younger you are when you buy the insurance, the lower your initial
premiums will be. However, there is no guarantee your rates will not go
up. Look for policies with provisions that give you money back if
your premiums become unaffordable – called nonforfeiture
- Gender: Women are more
likely to need LTC because they have longer life expectancies.
- Family situation: If you
have a spouse or adult children, you may be more likely to receive care
at home from family members. If family care is not available and you
cannot care for yourself, paid care outside the home may be the best
alternative. As policies cover different types of LTC, it is important
to buy a policy that will cover the type of care you expect to need and
will be available in your area.
- Family health history: If
chronic or debilitating health conditions run in your family, you could
be at greater risk than another person of the same age and gender.
- Income and assets: You may
choose to buy a LTC policy to protect assets you have accumulated. On
the other hand, a long-term care policy is not a good choice if you
have few assets or a limited income. Some experts recommend you spend
no more than five percent of your income on a long-term care policy.
Do you qualify for Medicaid?
As an older adult, you may qualify for Medicaid, which pays almost half
nation’s LTC bills. To qualify for Medicaid, your monthly income
must be less
than the federal poverty level, and your assets cannot exceed certain
Medicaid will cover you only in approved nursing homes that offer the
care you need. Under certain circumstances, Medicaid will pay for home
Some states have LTC insurance programs designed to help people with
financial impact of spending down to meet Medicaid eligibility
these partnership programs, when you buy a federally qualified
you will receive partial protection against the Medicaid maximum asset
requirement. Check with your state insurance department or a counseling
to see if these policies are available in your state
If you have questions or are confused about your insurance
contact our Consumer
at (800) 852-5494, (501) 371-2640, or firstname.lastname@example.org.
Get smart about your insurance needs! More information about
auto, home, life and health insurance options — as well as tips
for choosing the coverage that is right for you and your family —
is located on the NAIC website: www.InsureUonline.org.