Long Term Care Insurance: The Basics

With the American population aging, more than 40% of us are expected to need some type of long-term care during our lifetimes. Long-term care encompasses traditional nursing homes as well as assisted living facilities, certain types of hospital stays after surgery and other procedures, and care provided in the home. One feature common to all types of long-term care is that it tends to be expensive, and there’s a gap left in Medicare and traditional health insurance policies for the coverage of long-term care. These plans cover only minimal long-term care expenses, and not everyone qualifies for Medicaid.

This is where long-term care insurance comes in. Long-term care insurance is a type insurance policy you can buy in anticipation of your need for extended care. Here’s a brief overview:

• Your policy will allow you to choose a daily benefit amount, as well as a lifetime maximum benefit. The daily benefit amount is the amount the policy will cover for your care on a daily basis. The lifetime maximum is the total ceiling which the insurance will pay for your care. For example, if you choose a daily benefit amount of $250 for a three-year policy, then you’ll have a lifetime maximum benefit of $273,750.
• You’ll also choose the type of location where you’ll be able to receive care. You can opt for a “facility care only” policy or a “comprehensive” policy. A “comprehensive” policy covers the cost of in-home care as well as nursing home or assisted living care, while a “facility care only” policy, as its name suggests, only pays benefits for care you receive during your stay on-site in a facility.
• Generally, the older you are, the more expensive a long-term care policy premium is.
• Policy add-ons, called riders, may be available to cover additional in-home care devices like wheelchair ramps, grab bars, and monitors.

It’s a good idea to seek the help of a trusted advisor when buying long-term care insurance. You don’t want to buy too little and be left without sufficient coverage when you need it. By the same token, it’s a mistake to buy too much and be left with expensive, unnecessary coverage.