Long Term Care Insurance is an important component of any financial plan. It is not purchased for the medical care one will need or receive, but rather designed to help people maintain their quality of life, dignity and independence for as long as possible.
Long Term Care policies pay a benefit to an insured to assist with activities of daily living, such as bathing, dressing, eating, moving from place to place and using the restroom when the insured is unable to undertake these activities without assistance.
Twenty Questions and Answers On Long Term Care Insurance
1. What Is Long-Term Care?
Long-term care covers a wide range of services but generally falls into two categories: skilled care and personal care. Skilled care is provided when recovering from an illness or injury and personal care helps maintain the activities and functions of daily life. Long-term care is usually not medical care and generally does not require a doctor or nurse. It is providing individuals with assistance in daily living such as bathing and dressing. Long-term care can also include speech or occupational therapy, outfitting a bathroom with grab bars, or even light housekeeping or preparing meals.
2. Who Receives Long-Term Care?
You may think that you are too young and that long-term care is a problem for the “older generation.” But people of all ages could need long-term care. You can suddenly need long-term care if you have a serious accident, develop an illness, or get a disabling disease.
3. Who May Need Long-Term Care?
The good news is Americans are living longer than ever before. Over the last 50 years, life expectancy has increased steadily. Unfortunately, the longer you live, the greater your chances may be of needing long-term care.
4. What Do Medicare and Medicaid (Medi-Cal in California) Cover?
Generally, Medicare covers only skilled care after you have been in the hospital for at least three days. It usually does not cover personal or home care services. It was never designed to pay for extended long-term care and you should not count on it to meet this need.
Medicaid/Medi-Cal is designed to pay for long-term care services for the very poor. To qualify, you must meet your state’s poverty guidelines. In many cases, you must use up (or “spend down”) your assets and savings to just $2,000. If you have assets to protect, Medicaid is not a viable option to plan for your long-term care.
5. Where Can Long-Term Care Services Take Place?
When you think of long-term care, the first thing you may think of is a nursing home. But if you’re like most people, you probably want to avoid a nursing home, unless there is no alternative. Long-term care can be performed in a variety of settings including institutions, such as a nursing home or assisted living/residential health care facility, or in your home or a community-based adult day care center.
6. Isn’t Long-Term Care Covered By Health Insurance?
Some people may believe that their health insurance will cover their long-term care costs. This is probably not the case. Consult your health insurance plan to find out the limitations of your health care coverage as it pertains to long-term care.
7. Doesn’t Disability Income Help Cover Long-Term Care Costs?
Disability income insurance is designed to help replace part of lost income while you are actively employed, and usually the coverage ends at age 65 or upon retirement. Disability income insurance was not designed to pay for long-term care. By the time you realize you are not covered, it could be too late.
8. How Much Does Long-Term Care Cost?
The cost for services can vary greatly, depending on what type of care you need and where you receive it. But, two things are certain: (1) long-term care services can be expensive; and (2) relying on family or friends may not always be the answer.
According to a quantitative study conducted by Prudential Financial in 2008, the national average for a private room in a nursing home can cost an average of $217.00 per day, or over $79,000 annually. A visit by a home health aide averages $21.00 per hour. These costs are continually inflating and in many parts of the country, the costs are much greater. Home care, although generally less expensive than nursing home care, can still be very costly - especially if round-the-clock care is required.
When a member of the family provides informal care at home, the costs are impossible to determine.
9. Can’t I Pay For It Myself?
Sure, you might be able to pay for it yourself, but quality long-term care is not cheap. In fact, it is very expensive and can drain a lifetime of savings.
Some of us underestimate the costs of long-term care services and could end up depleting our retirement savings and income.
With long-term care insurance, you can help offset the cost of long-term care services without exhausting your assets or savings. It helps provide options and choices without sacrificing your lifestyle, or that of your loved ones. You have worked too hard to lose everything to pay for long-term care services.
10. What Is Long-Term Care Insurance?
Long-term care insurance is just another way to help guard against risk. It allows you to help protect your assets and maintain control by providing you with long-term care alternatives. It may be an economical way to pay for long-term care related expenses.
11. How Does Long-Term Care Insurance Work?
Long-term care insurance is designed to provide reimbursements for claimed services for those who need help with activities of daily living (ADLs) - those everyday activities of caring for yourself such as getting dressed, eating, or moving from a bed to a chair. Someone with a cognitive impairment (such as Alzheimer’s disease or senile dementia) may need constant supervision and reminders to do simple daily tasks.
12. What Services Are Covered?
Over 20 years ago, the first long-term care insurance policies only covered nursing home care for individuals. But today, there are many long-term care alternatives, and insurance policies emphasize care in the home and support of caregivers. Some policies cover:
13. “Facility Daily Benefit”...What Does That Mean?
The Facility Daily Benefit is the greatest amount your policy will reimburse you toward your institutional long-term care needs for one day. The amount of the benefit you choose will depend on many factors, including how much you think it might cost you per day to stay in a nursing home in the area in which you believe you will be needing long-term care. Premiums will vary with choice of benefits selected.
14. What About Home Care?
Staying at home is an important part of overall long-term care planning. Policies typically offer home care as a stated percentage of the facility daily benefit. It is usually 50%, 75%, 100%, or 150% of this benefit amount. In California, home care benefits are paid at a rate of no less than $50 per day.
15. How Do Long-Term Care Policies Keep Up With Rising Health Care Costs?
Over time, the cost of almost everything we purchase goes up. Long-term care services will be no different. There may be a long period between the time you purchase your coverage and when you actually use it. You can help protect the value of your coverage and keep up with the rising costs of long-term care services by purchasing an inflation protection rider. This is an important feature of any long-term care policy and is critical for all buyers under the age of 70.
16. Is There A Waiting Period Before A Claim Can Be Made?
Yes. A waiting period, also called an elimination period, is the time you must wait before becoming eligible to make a claim against your policy. The elimination period is the long-term care insurance equivalent of a deductible or “out-of-pocket” expense. But unlike other deductibles, it is based on the number of days, not a dollar amount.
17. What Does Long-Term Care Insurance Cost?
Some people do not know the actual cost of long-term care insurance and may mistakenly believe it is unaffordable. Although actual premiums can vary, the cost of not having long-term care insurance could be much higher if you require care for an appreciable period of time. You may underestimate the costs of long-term care services and could end up depleting your retirement savings and income.
18. Is There An Advantage To Buying Now?
When you purchase coverage at a younger age, you typically pay a lower premium. Since you must be reasonably healthy to obtain long-term care insurance, you’ll also be more likely to avoid the risk of not qualifying for health reasons. Finally, don’t forget about peace of mind. Owning a long-term care insurance policy can help offset the cost of long-term care services without exhausting your assets or savings - helping you to feel more confident about protecting your financial assets from the high costs of long-term care.
19. Is Long-Term Care Insurance Right For You?
If you have assets or income you want to protect from the high costs of long-term care, then you should seriously consider long-term care insurance. You should also consider long-term care insurance if the following are important to you:
20. What’s The Next Step?
Long-term care can be a complex issue and requires professional guidance. It is a good idea to start by speaking with family members or friends about the potential costs and likelihood of needing long-term care. You should then find a professional you are comfortable with and trust to explain the options available to you. One of our long-term care specialists at Benchmark Benefits can help. Before you make a final decision, make sure you have performed a thorough review of the policy and it is within your financial means.
Remember, the key to a happy and successful future may be as simple as planning for it!