Long Term Care Insurance
Long-Term Care
Why You Should Consider a Policy?
Previous generations did very little planning for long-term care needs because family members were usually available to provide care. But changes in society, demography and the family make this arrangement less feasible today and in the future. Smaller families, high migration patterns, more women in the workplace and increased longevity mean a family member is less likely to be available as a caregiver while at the same time you are more likely to need long-term care in the future.
- To stay in control of your own assets (resources).
- Giving you the flexibility to participate in deciding where to get care and who provides it.
- Helping protect your retirement savings by letting you use it for what it was originally intended; enjoying retirement.
- To increase your chance of getting the long-term care of your choice -- whether in a nursing home or in your home -- when you need it.
- To establish lifetime care and give yourself and your family peace of mind.
Understanding Long-Term Care
Long-term care is provided to people who are unable to perform the basic activities of daily living like bathing, dressing or moving from a bed to a chair. You may need assistance if you suffer from an injury like a broken hip, an illness or a stroke. Others may need help because of mental deterioration called severe cognitive impairment that can be caused by Alzheimer's disease, other mental illness or brain disorders.
Long-term care insurance covers long-term care services provided in a nursing home, at home or in community-based settings which Medicare, Medicare supplemental insurance (Medigap) and traditional health and disability insurance plans typically do not cover.
Funding Long-Term Care
Self-funding
Self-funding is paying for long-term care costs out of pocket with personal or family money, savings, pension benefits, stocks, bonds and other investments.
Pros: Flexibility in choosing care providers.
Cons: Could jeopardize goals and may be costly.
Family
Your family or loved ones provide care and may need to contribute financially.
Pros: Care provided by those you know and trust
Cons: May not be skilled at providing care. Caregiver may have to decrease work or shift priorities.
Government Programs
These programs, such as Medicare and Medicaid, can help pay for some long-term care expenses in certain cases, but they generally do not pay for care at home.
Pros: Care possibly paid by government
Cons: Limited or no coverage. Spend down of your assets to qualify
Long-Term Care Insurance
This insurance is designed to provide coverage for extended care. Ordinary health insurance and medical expense policies do not pay for long-term care expenses.
Pros: Transfer some or all of the risk. May prevent depletion of personal funds.
Cons: May never use coverage.
Components of Long-Term Care Insurance
Benefit Amount - This is the maximum amount of expenses covered in any single month or day. Benefits amounts vary by plan.
Benefit Period - This is the minimum number of months the coverage will pay benefits for covered expenses.
Total Benefit Amount -The total benefit amount is determined by multiplying the monthly benefit amount by the benefit period. These are the funds that are available for covered care.
For example, to determine a monthly benefit amount of $10,000 with a three year benefit period you would multiply $10,000 (benefit amount) x 36 months (the benefit period 3 x 12 months). The total amount of benefit dollars available is $360,000.
Inflation Protection- This is an optional feature available on some plans. Generally it increases the monthly maximum to help ensure the policy keeps pace with the increasing costs of care.
Elimination Period - This is the amount of time that must pass before the benefits will become available. Just like a deductible this is the out-of-pocket expense. The shorter the elimination period, the higher the premium will be.