What is Long Term Care Insurance?

What is Long Term Care Insurance?


Long Term Insurance helps to cover many of the basic medical and health care costs experienced by senior citizens, but why could this coverage be necessary?

A moderate to severe medical diagnosis may have a devastating effect on a lifetime's savings account, future financial stability and peace of mind. Experts predict that over 23 million Americans will need long term care insurance by the year 2030, with projected costs of such care reaching $300,000 annually. Who can afford that?

Common medical conditions afflicting seniors today, including Alzheimer's, Parkinson's disease, frailty, stroke, or accidents, may take anyone by surprise, leaving spouses, children and extended family members wondering how they're going to pay for the care of a loved one.

Several considerations should be addressed when determining the future necessity of long term care insurance. According to a study determined by insurance underwriters, individuals are at an increased risk if:

  • He or she is older
  • You are a woman
  • You are single
  • You don't exercise regularly
  • You have a family history of neuro-degenerative diseases such as arthritis or Alzheimer's
  • You smoke
  • You engage in physical activities or hobbies that may accelerate risks for injury, including boating, motorcycles, etc.
long term care insurance

Long Term Care Basics

Most people believe that long term care insurance is only for skilled nursing facilities or nursing homes. However, the majority of long term care starts in a home environment, where seniors prefer to stay until care becomes a burden to other family members.

Medicare only pays for skilled nursing facilities provided certain specific and rather limited circumstances are met, and such payment only lasts for short period of time.

Long term care provides benefits for home care as well as coverage of some assisting living facility costs. A major benefit of long term care insurance is that it gives the individual more choices in regard to the type of care he or she receives in the future.

Premium costs increase as an individual ages, and insurance companies suggest that individuals start purchasing long-term care insurance plans in their forties. However, a report by Consumer Reports determined that doing so was not really necessary. Their reasons:

  • The insurance provider may be bought out by other insurers or go out of business altogether, leaving individuals who have paid premiums for long periods of time without coverage or reimbursement.
  • Coverage may be insufficient. What may be adequate today may not be adequate 2, 5 or even 10 years from now.
  • Long term care insurance also stipulates elimination or deductible periods (like other insurance) that may range from 20 to 100 days, during which care must be paid for by the individual. In addition, many policies may offer a lifetime coverage, but individuals are required to pay premiums for policies they may not need for 10, 15 or 20 years.

What Exactly Does Medicare And Medicaid Cover?

Medicaid covers the costs (nursing care, room, board, social activities) of an individual living in a nursing home if he or she meets certain health related criteria as well as a predetermined poverty level determined by the state in which he or she lives.

In most cases, an individual may only be allowed to keep his or her home if a spouse currently resides there. In most cases, individuals are allowed to keep their car, funeral funds and burial plots, and a limited amount of cash, typically capping out a $2,000.

Medicare will only pay for care in a skilled nursing facility for 20 days. Following 20 days, individuals are responsible for co-payments, which average about $105 a day. After 100 days per benefit, (which is determined by the period of time an individual is hospitalized that ends after an individual has been out of the hospital for a period of 60 days), Medicare no longer pays. In order to qualify for nursing home or skilled nursing care facilities, an individual must be hospitalized three days prior to needing that care, which must be certified as necessary by the individual's physician.

Bottom Line

Most consumers today purchase care insurance for a five to ten year time frame and hope that he or she will not need skilled nursing facility or nursing home care prior to or following that time.

Most health care experts agree that a five year benefit plan is sufficient for most individuals over 65, as average length of stay in nursing homes is about 2 1/2 years. It might be appropriate to choose such policies with a 30 day elimination or deductible and take into consideration rise of inflation prior to purchasing any long-term care insurance policy to make sure that future needs will be met.

As always, talk to an insurance professional that specializes in this type coverage for a complete understanding of what could be involved and decisions to be made.

Senior Insurance

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