Long Term Health Care Insurance
Explains common terms associated with long term health care insurance and their meanings. Helps people make informed decisions when choosing a policy. Prevent from making costly mistakes.
Long-term care is the assistance provided when people are unable to provide for themselves. It ranges from providing personal care at home, such as bathing and dressing, to skilled nursing services in a nursing home. Currently 40% of those receiving care are under the age of 65 so this is not just insurance for when you get older. Another important fact that many people are not aware of is that Medicare does not cover long term care. While they do pay for short term home health care, they will not pay for custodial care and that is what long term care is all about.
There are two basic types of long term care insurance. Comprehensive plans cover both home care and nursing home care. Non-comprehensive plans cover home care or nursing home care but not both. Home health care only plans cover care from nurses and therapists, as well as personal care from health aides and housekeepers provided in your own home. Nursing home only plans provide a daily benefit to cover the cost of a stay in a skilled nursing facility.
The right Long Term Care policy can be a wonderful asset to you when you get older and need assistance doing everyday activities. The wrong policy can be a complete waste of your precious money and never be of any use to you. Here are a few questions you should ask and what answers you should be looking for to make sure that your policy would take care of your needs.
The most important question is whether or not you actually need Long Term Care Insurance (LTC). A LTC insurance policy generally will not benefit you unless you have an annual gross income of at least $30,000 and also have at least $75,000 in assets, not including your home and automobile. If your gross income is below $15,000 and your assets are less than $76,000, Medicaid will probably cover any long-term care needs you may have.
Now that you have determined that you do need LTC insurance there are 4 terms that you should be familiar with before you speak with an insurance agent: elimination period, benefit amount, inflation protection rider, and benefit period. I will explain what each term means and what answers you should be looking for.
The elimination period is the number of days you must pay privately for care before they will pay any of your expenses. Some policies do not have any while others have 100 days or more. Since in the year 2000 the average cost of a care is $100 day, apply the Rule of 72, the cost will double every 9 years and in 18 years a charge of $100 per day will be $400. If your policy has a 100-day elimination period you will have to pay $40,000 yourself before your policy will pay out a dime.
The benefit amount is usually stated differently for home care than it is for nursing home care. The nursing home benefit is usually stated only in a dollar amount, while the home care portion can be either be a certain number of hours of care per day or a set dollar amount per day. The set number of hours is definitely a better choice. This guarantees that as long as you meet their criteria you can receive care no matter how much that care costs. If your policy has a set dollar amount make sure that you have an inflation protection rider. I do not know of any policy I would recommend without that rider. When you apply the rule of 72, there is no currently written policy that can keep up with that unless their benefits are adjusted with the rate of inflation.
The benefit period is the amount of time that the policy will pay for your care. Since the average time spent in a nursing home is approximately three years, that is the absolute minimum amount of coverage any policy should carry. Since the average life expectancy is increasing I believe that it make much more sense to purchase high level of coverage. Some policies carry a lifetime benefit and these are the best possible choice.
Also available is a provision that waives premium payments if you are receiving benefits. This can represent great savings at a time when a persons income is generally the most limited.
The last thing to inquire about is the criteria that is used to decide if benefits are payable. Generally in order to require care a person must need assistance with Activities of Daily Living (ADLs). The commonly recognized ADLs are bathing, dressing, toileting, transferring (getting in and out of a chair or bed), and continence (voluntary bowel and bladder functions). Approximately 2.9 million U.S. citizens need assistance with only one or two ADLs. A policy that requires assistance with three or more ADLs rarely offers benefits to the policyholder. Some policies will waive the ADL requirement if the patient is cognitively impaired. This will allow accessing the benefits with diseases of the brain like Alzheimer’s Disease.
More than 40% of all people over the age of 65 will enter a nursing home during their lifetime. Even more will require assistance to remain in their own homes. Long Term Care Insurance can allow people to retain their assets for their families rather than paying it all out for needed care.