Long-term care (LTC) insurance is a relatively new form of insurance that has evolved in response to the escalating cost of nursing home stays and in-home care providers. It helps to pay for personal care services when you lose the ability to carry out daily activities such as bathing, dressing and eating. Consider purchasing this insurance if you want the freedom to choose high-quality LTC services without having to drain your assets and your family's savings.
What Services Are Covered?
LTC insurance reimburses you for eligible expenses related to your personal care assistance, such as nursing home stays, assisted living facilities, adult day care facilities and home health aides. While Medicaid covers some of these services, Medicare and private medical insurance plans do not typically pay for LTC insurance.
Who Should Purchase It?
If you have very little money and will likely qualify for Medicaid, you should not purchase LTC insurance. If you are at the other end of the spectrum, at which you can independently afford any level of LTC services, you can also do without this insurance. Most people, however, fall somewhere between, where LTC insurance will help pay for high-quality LTC services.
Who Needs LTC Services?
Close to 70 percent of individuals age 65 and older will require some type of long-term care services during their lifetime, based on U.S. Department of Health and Senior Services statistics. More than 40 percent of this age group will need care in a nursing home for some period of time. While most people who need long-term care are elderly, individuals at any age may need LTC services. As many as 40 percent of those receiving long-term care are below 65 years of age, according to the U.S. Department of Health and Senior Services.
How Much Insurance Should You Buy?
LTC services are expensive. As of 2009, the average cost of nursing home stays exceeds $5,000 per month. Women may need more benefits than men. U.S. government statistics show that women tend to need LTC for longer periods than men do (average 3.7 years vs. 2.2 years). How much insurance you should select for the policy depends on how much you are prepared to pay out-of-pocket to cover your LTC needs. The more you are willing to pay out-of-pocket, the less costly the premium.
Premium and Payout
Not everyone can afford LTC insurance. A middle-age individual can expect to pay around $2,000 annually for benefits worth about three years of nursing home stay. Unlike term life insurance, which expires after a pre-determined time period, LTC insurance continues as long as the premiums are paid. You cannot predict how long you will be paying the premiums before you become eligible for benefit payouts. If you fail to keep the premiums current, you may lose your coverage and all the premium dollars you have already paid. Therefore, you should buy a policy only if you are sure you can pay the premium for the rest of your life.
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