Long-term Care Insurance Explained: What It Is, Types of LTCI Policies & What to Consider

January 7th, 2008 by Gilbert Guide

Comments (0)

What It is

Long-term Care Insurance can be an effective tool for protecting your assets and estate from the high costs of senior care. Though the average nursing home length of stay is significantly higher than most people believe, 2.4 years according to a report conducted by the National Center for Health Statistics, less than 20% of long-term care is nursing home care. Home care, home health care, adult day care, assisted living facility care and others constitute the overwhelming majority of senior care services.

Generally, the people who are in need of care are responsible for paying the costs. Long Term Care is usually not covered by your personal health insurance plan or by the policy you may currently have from a present or previous employer. Medicare usually pays for only a small percentage of skilled nursing costs while Medicaid provides health care coverage to Americans with lower incomes and can pay almost half of all nursing home costs.

Though it is likely that you will need long-term care in the future, no one can predict the kind of care that may be needed or the exact costs involved. With Long-term Care Insurance, you can plan and budget for a known and quantifiable premium for a policy that can protect you from potentially large out of pocket expenses. It can be beneficial to learn about the different types of policies available to you in order to match the most appropriate policy to suit your needs.

Types of LTCI Policies

The most common policy type is indemnity which pays a maximum fixed benefit. A benefit amount is chosen at the time the policy is issued and actual expenses, up to a fixed predetermined dollar amount, are reimbursed as they are incurred.

Integrated policies pool benefits are becoming more popular today. The provisions allow for a total dollar amount that may be used for various long-term care services with expense limits on a daily, weekly or monthly basis. Due to rapidly increasing long-term care costs, most policies offer inflation adjustments to help offset high anticipated future costs.

Long-term Care Insurance policies often take effect when an individual is unable to perform activities of daily living or becomes cognitively impaired from dementia or related illnesses. Home care services such as physical therapy, skilled and unskilled nursing care and home health aide support provided by licensed agencies are generally covered as are skilled, intermediate and custodial care services provided in licensed nursing facilities. It should be noted that if any conditions are preexisting, benefits often denied if care is needed within six months of the policy's issue date for that condition.

What to Consider

There are now over 100 Long-term Care Insurance products on the market today. Before selecting a provider and policy, please consider the following before making any purchases:

Verify that the insurance agent is licensed to sell long-term care insurance in your state and review ratings to ensure that the insurance provider is financially secure since you will likely need the policy for years to come
Determine exactly which services are covered, e.g., skilled nursing home care, unskilled nursing facility care, home health care, adult day care, etc.
Examine the length of time benefits are provided for the various types of services covered, look for maximum lifetime benefit amounts
Identify the length of time before preexisting conditions are covered
Find out how long you must wait before benefits begin for services
Inquire regarding coverage of Alzheimer's and other related illnesses
Review any premium provision waivers
Analyze cost requirements to ensure your ability to make policy payments during retirement years.

As with all complex and important decisions, you should talk to friends and relatives to obtain recommendations and share experiences regarding various policies, review all paperwork, with the consultation of your attorney if needed, to ensure that you understand policy provisions and discuss economic implications with your financial advisor. If you feel that you need additional assistance, contact the Department of Insurance in your state for further information.

Posted in: Long-term Care Insurance (LTCI), Planning for Long Term Care