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Long Term Care insurance
What is Long Term Care?
Long term care can mean many different things but any chronic or disabling condition that requires nursing care or constant supervision can bring on the need for long term care services. Long term care means not only care in a nursing home, it can also mean nursing care in your own home and help with the activities of daily living, such as dressing, eating, bathing and taking medicine.
There are many different services that would fall under the definition of long term care. These services include institutional care, i.e., nursing facilities, or non-institutional care such as home health care, personal care, adult day care, long term home health care, respite care and hospice care.
Why Would an Individual Purchase a Long-Term Care Insurance Policy?
People purchase a Long-Term Care Insurance policy for several reasons. A few that should be considered are: To avoid being a burden and prevent stress on spouse and/or family who may not be able to provide the emotional and physical care needed. To help preserve independence and freedom of making choices rather than being dependent upon others. To help conserve an estate and retirement assets, especially for a spouse, while protecting children's inheritance. To help fund high-quality long-term care. To help avoid having to move away from a hometown area and give up friends and physicians. Overall, the investment is very small in relation to the benefit received
At What Age Should Long-Term Care Insurance Be Purchased?
Long term care insurance is most popular among older people, especially the aging Baby Boomer generation. Elderly are the most likely to need it. However, the U.S. government estimates that 40% of the 13 million people receiving long term care are between 18 and 64. Part of the reason that number is so high is that it includes handicaps of all types. But an accident can happen to anyone.
Also, note that the sooner you get long term care insurance, the less it will cost. The premiums generally don't increase as you age.
Who pays for long-term care?
Private Long -Term Care Insurance may allow more freedom to choose where and with whom they will seek their care. An individual does not have to spend down their assets to use it. There are several policies that can be tailored to match what an individual believes they will need should the time come when a chronic illness or long term care needs arise. The costs of these policies vary with the choices made.
Medicaid was created as a safety net for individuals. To get Medicaid help, one must meet federal and state guidelines for income and assets. It is no secret that many people use Medicaid to pay nursing home bills. Medicaid, however is very limited as to the sites of care the government will pay for. Some providers that a person would like to turn to for help at this time do not accept Medicaid patients. For example, companies that provide custodial care in the home, many assisted living facilities, as well as some nursing homes.
Medicare's skilled nursing facility benefit does not cover most nursing home care. Medicare will pay the cost of some skilled care in an approved nursing home or in the individual's home, but only in some situations. This benefit only covers a situation if a medical professional indicates there is a need for daily skilled care after a hospital stay of at least three days. Medicare should not be relied upon to pay for long-term care needs.
Private Pay would be all out-of-pocket monies to cover the entire cost which can be extremely expensive.
How much long-term care insurance should I buy?
This is a difficult question because not everyone's needs are going to be the same. Various companies will pay different amounts for different types of services. You must be sure that you understand how much coverage you will have and how it will cover the long term care you receive.
Depending on your own individual circumstances, your needs could be more or less than the next person. Our professional agents at National Quotes Online will be happy to discuss your needs and budget and go through a "needs analysis" with you to tailor a plan to meet your budget.
What is the average cost of Nursing Home care in the U.S. today?
The average cost of Nursing Home care in the U.S. today is around $160 per day. Depending on your area, the cost could be significantly higher or lower. You may want to research several of the Nursing Homes in you area to determine the level of care you may need or ask our skilled agents to do this for you.
All companies that offer Long Term Care insurance will have a broad range of daily benefit levels that you can apply for. Usually the range will be from $50 per day to $400, and in some cases the company may offer up to $500 per day. The more you apply for, obviously, the more the plan will cost.
There will be other considerations in the policy that will affect the cost also. The elimination period, or deductible in days, is the time you will have to pay out of pocket before benefits begin. The number of years you wish the plan to pay for benefits and whether or not you want to include inflation protection will also affect the premium.
What about inflation?
Long-Term Care costs are expected to rise in the future, so it is wise to purchase some type of inflation protection. Most companies will offer a choice between compound and simple inflation. Simple inflation increases the maximum daily and weekly benefits by 5% of its original amount. With simple inflation, benefits will double every 20 years. Compound inflation is very similar to simple inflation except the maximum daily benefits are increased by 5% of the previous year's amount. Benefits will double every 15 years with this type of inflation. Some insurance companies have the option of a Cost of Living Increase rider that gives an individual the option to increase a maximum daily benefit on a specific anniversary date with a premium increase
What types of Insurance Policies Are There?
There are three basic types of insurance policies currently on the market to cover long-term care expenses. They are:
- Long-Term Care Insurance Policies
These policies cover both institutional (nursing home or other facility) care and care in the community (home health care or other community-based services).
- Nursing Home Insurance Policies
These policies cover only institutional (nursing home or other facility) care.
- Home Health Care Insurance Policies
These policies cover only care received in the community (home health care or other community-based services).
Please note that only those policies that provide coverage for both institutional and community-based care may be advertised or sold as Long-Term Care insurance policies.
What Should I Look For When Buying A Long-Term Care Policy?
All long-term care policies must meet consumer protection standards set by the state in which they are sold. Also, any plans that qualify for federal tax deductions must meet additional consumer protection standards set by the federal government. However, you should still review any policy you are considering to be sure that it contains the minimum standards for long term care set forth by the National Association of Insurance Commissioners:
- At least one year of nursing home or home health care coverage, including custodial care. Benefits should not be limited primarily to skilled care.
- Coverage for Alzheimer's disease should you develop it after purchasing the policy.
- An inflation-protection option.
- A guide that systematically and clearly describes your policy's benefits, limitations, and exclusions, and contains information designed to help you decide whether long term care insurance is really right for you.
- A guarantee that the policy cannot be canceled when you get older or if you suffer physical or mental deterioration.
- The right to return the policy within 30 days after you have purchased it and to receive a premium refund, also known as the free look period, which is often required by state law.
- No requirement that you: first be hospitalized in order to receive nursing home or home health care benefits; first receive skilled nursing home care before receiving custodial nursing home care; or first receive nursing home care before receiving benefits for home health care.
What are the Tax Implications Of Long Term Care?
Most long term care policies sold today are tax-qualified, which means your premiums for long term care insurance, as well as your out-of-pocket expenses for long term care, can be applied toward meeting the 7.5 percent floor for medical expense deductions contained in the federal tax code. However, there are age-based limits for the total amount of premiums paid for long term care insurance that can be applied. You should check with your tax adviser to see whether you are eligible to take this deduction.
What should I specifically look for when I'm ready to buy?
Long-term care policy checklist
Before you begin shopping, you should find out how much nursing home or home health care costs in your area today. If you needed care right away could you find it locally or would you have to go to another, potentially more expensive area? Once you've done some research, you can use the following checklist to help you compare policies you may be considering.
- What services are covered?
- Nursing home care
- Home health care
- Assisted living facility
- Adult daycare
- Alternate care
- Respite care
- How much does the policy pay per day for nursing home care? For home health care? For an assisted living facility? For adult daycare? For alternate care? For respite care? Other?
- How long will benefits last in a nursing home? At home? In an assisted living facility? Other?
- Does the policy have a maximum lifetime benefit? If so, what is it for nursing home care? For home health care? For an assisted living facility? Other?
- Does the policy have a maximum length of coverage for each period of confinement? If so, what is it for nursing home care? For home health care? For an assisted living facility?
- How long must I wait before preexisting conditions are covered?
- How many days must I wait before benefits begin for nursing home care? For home health care? For an assisted living facility? Other?
- Are Alzheimer's disease and other organic mental and nervous disorders covered?
- Does this policy require: An assessment of activities of daily living? An assessment of cognitive impairment? Physician certification of need? A prior hospital stay for nursing home care? Home health care? A prior nursing home stay for home health care coverage? Other?
- Is the policy guaranteed renewable?
- What is the age range for enrollment?
- Is there a waiver-of-premium provision for nursing home care? For home health care?
- How long must I be confined before premiums are waived?
- Does the policy have a nonforfeiture benefit?
- Does the policy offer an inflation adjustment feature? If so, what is the rate of increase? How often is it applied? For how long? Is there an additional cost?
- What does the policy cost?
- Per year?
- With inflation feature
- Without inflation feature
- With nonforfeiture feature
- Without nonforfeiture feature
- Per month?
- With inflation feature
- Without inflation feature
- With nonforfeiture feature
- Without nonforfeiture feature
- Is there a 30-day free look?