What is Long Term Care Insurance?
With age comes an increased chance of chronic illness, cognitive impairment, and other conditions that can make routine activities difficult to perform. When a situation like this becomes serious enough, long term care (LTC) is needed. This could be as simple as having someone around to supervise you and make sure that everything is okay to having a nurse on-hand to help with taking medications, getting dressed, and other facets of day-to-day life.
Long term care is becoming a bigger and bigger concern as more people live into advanced age. According to the U.S. Department of Health and Human Services, 70% of current 65-year-olds will use some form of long term care in the future. With the likelihood of needing long term care that high, it pays to plan ahead and start thinking about what type of care you may require, how long you will need it for, and how you are going to pay for it. Considering the possible costs of long term care insurance is an important part in any long-range financial plan, especially for those who are in their 50s or beyond.
This is where long term care insurance comes in. This is a specialized form of insurance that helps those with chronic illnesses, disabilities, and conditions such as Alzheimer’s get through daily life. It helps to pay for many different forms of caregiving and assistance, including skilled care provided by nurses and therapists. Such care includes help with eating, bathing, getting dressed, doing chores and other household activities, and making sure that the patient takes all of his or her proper medications. Long term care insurance can help cover the cost of the care that you or your loved one needs.
One major mistake that many people make when it comes to long term care is thinking that Medicare or their existing health insurance will cover it. Most forms of health coverage do not cover this kind of daily, long term care. Medicare does cover brief stays in nursing homes or limited amounts of at-home care for those in need of skilled nursing, but the conditions surrounding this are very strict. Medicare also does not cover custodial care, a non-medical service that offers supervision and help with day-to-day activities. Medicaid, the federal and state health insurance program for people with lower incomes, can offer some help, but this is also limited and is only offered to people who have already exhausted most of their savings. Because of this, those who are concerned about paying for future long term care will often choose to buy long term care insurance.
How do long term care insurance policies work?
At its most basic, it has you pay long term care insurance premiums regularly while you are still healthy, and once you are in need of care, it reimburses you a daily amount to help pay for LTC services.
Once you have chosen a policy, been approved, and the policy has been issued, you begin paying premiums. The cost of these premiums will vary depending on how much coverage you chose to get, along with other factors that are covered in detail in another article. The money paid through these premiums will go towards the benefits that the policy pays out later in life.
Long term care insurance policies are guaranteed renewable, meaning that they cannot be cancelled or terminated because of the policyholder’s age, physical condition, or mental health. This means that no matter what happens, you will be able to keep your policy as long as you pay your premiums. Additionally, the insurance company cannot change the wording in your policy after you’ve purchased it, nor can you be singled out for a rate increase.
Under most long term care insurance policies, a person is eligible to receive benefits when they are unable to perform two of six common activities of daily living (ADLs) without assistance, or when they develop dementia or a similar form of cognitive impairment. The six ADLs that are typically used are:
- Toileting (getting on or off)
- Maintaining continence
- Getting into or out of bed, chairs, wheelchairs, etc.
Even after you have met the ADL requirement, most policies will have you pay for care out-of-pocket for a predetermined period of time. This is called an elimination period and commonly lasts for 30, 60, or 90 days. After you complete the elimination period, you will start receiving daily benefits up to a certain amount. You will continue receiving these benefits until you have reached your predetermined maximum.
Planning for long term care and its related expenses can be complicated and confusing at times. Many people don’t fully understand the options that are available to them and what steps should be taken when making these kinds of decisions. Luckily, there are plenty of resources available to help you be as informed and prepared as possible. Take a look at our articles on the costs of long term care, the pros and cons of LTC insurance, alternative strategies, and more. When you feel that you are ready, talk to an experienced long term care insurance agent and see what type of plan will work best for your needs and budget.
Remember, it is never too early to start thinking about the future.
More Useful Links:
Services Covered by an LTC Insurance Policy