Long Term Care Insurance Basics

What is long term care insurance?

Long term care insurance is an economical way to help you protect your assets — and your loved ones — against the high cost of long term care. It will give you the control and security to help cover the cost of long-term care services and the independence to choose where to receive care.

Individuals and Families should consider Long Term Care Insurance if they want to:

  • Protect retirement assets and savings
  • Be proactive and responsible for reducing or eliminating the burden of care and assistance from family members
  • Maintain independence and control to choose where to receive long term care

Long term care insurance provides personal care, homemaker services, skilled nursing care, and physical therapy. Care can be provided at your home, adult family homes, assisted living facilities, and nursing homes. Depending on your long term care insurance policy and condition, varying amounts of care can take place in a variety of locations, and can range from a few hours per week at home to round-the-clock care in a nursing home.

Why do people buy long term care insurance?

According to The America’s Health Insurance Plans, 2007 National Survey, states people purchase long term care insurance for the following reasons:

  1. Minimize their financial exposure and take responsibility for protecting their assets
  2. Avoid being a burden on loved ones
  3. Enhance their choices and independence – to receive care in the setting they prefer

Who needs long term care insurance?

Most families benefit from the protection a long term care insurance policy offers. It is the most cost effective way to protect you and your family from the high cost of long term care. It allows you and your family to secure savings and your family’s future.

It is difficult to know if and when you will require long-term care. Various studies provide us with statistics on why people need long term care insurance:

  • The lifetime probability of becoming disabled in a minimum of two activities of daily living or of being cognitively impaired is 68% for people age 65 and older.1
  • By 2050, the number of people using paid long-term care services in any setting (e.g., at home, residential care such as assisted living or skilled nursing facilities) will likely double from the 13 million using services in 2000, to 27 million people. This estimate is influenced by growth in the population of older people in need of care.2
  • In 2002, the percentage of older persons with moderate or severe memory impairment ranged from about 5% among persons aged 65-69 to about 32% among persons aged 85 or older.3

1 AARP. Beyond 50.2003: A Report to the Nation on Independent Living and Disability, 2003,  (11 Jan 2005).
2 U.S. Department of Health and Human Services, and U.S. Department of Labor. The future supply of long-term care workers in relation to the aging baby boom generation: Report to Congress. Washington, DC: Office of the Assistant Secretary for Planning and Evaluation, (2003). <http:aspe.hhs.gov/daltcp/reports/ltcwork.htm> (20 Jan 2005)
3 Federal Interagency Forum on Aging-Related Statistics. Older Americans 2004: Key indicators of well-being, Federal Interagency Forum on Aging-Related Statistics. Washington, DC: U.S. Government Printing Office, 2004.

When should you buy long term care insurance?

  1. The cost of long term care insurance is based on your age and health when you apply. The younger and healthier you are when the policy is issued, the more affordable your long term care insurance policy will be.
  2. The long term care insurance coverage a person buys for their future will also help protect them today. If an accident or illness occurred today (e.g. stroke, heart attack, serious illness), which required you to need long term care, owning a long term care insurance policy would provide benefits to pay for some or all the cost of long term care.

By being proactive in your 40s and 50s and purchasing long term care insurance, you can reduce the uncertainty of later years and maintain control over important long term care decisions, your assets, and your family’s future.

Are you already covered?

Many individuals mistakenly believe their long term care needs are already covered. However, long term care assistance is not usually paid for by health or disability insurance. In addition, government programs like Medicare and Medicaid do not cover long term care costs over long periods of time.

How would you pay for long term care if the need arose?

Medicare is a federal program that provides hospital and medical insurance to individuals age 65 or older, along with certain ill or disabled individuals. Home health care benefits are only available under certain conditions.

In general, Medicare might pay up to 100 days of care in a skilled nursing facility per benefit period – 100% for the first 20 days. From days 21-100 Medicare requires a co-payment. Benefits only become available after a three day hospital stay, if skilled care is needed.

Medicaid coverage is predominantly based on income and assets, and in a majority of states typically only covers care received in approved nursing homes. In states where Medicaid does cover home based long term care expenses, it is done on a restricted basis.

Personal income and assets, including your home, are frequently used to cover long term care costs, which can have a significant impact on savings.

Family members often assume the burden of care, and in some cases the financial responsibilities of providing care. Over time this can have a significant impact on their lifestyle, personal and work commitments, and physical and emotional well-being.

Long term care insurance allows individuals to be confident about their future by providing them with resources today to maintain choice, control, and independence later on in life. It is a cost effective way for individuals to take responsibility for their health and long term care decisions. In addition, it will assist in securing your family’s future and your own quality of life by protecting retirement savings.

Is long term care insurance right for you?

You should CONSIDER buying Long-Term Care Insurance if:

  • You have significant assets and income
  • You want to protect some of your assets and income
  • You want to pay for your own care
  • You want to stay independent of the support of others

You should NOT buy Long-Term Care Insurance if:

  • You can’t afford the premiums
  • You have limited assets
  • Your only source of income is a Social Security benefit or Supplemental Security Income (SSI)
  • You often have trouble paying for utilities, food, medicine, or other important needs

What does long term care insurance cover?

Long term care insurance assists in paying for care services when you need help with normal daily activities, such as eating, bathing, and moving around – activities most of us take for granted. Long term care insurance also provides supervision as a result of cognitive impairments, such as Alzheimer’s disease. A long term care insurance policy provides different types of care in a variety of scenarios:

  • Skilled care includes nursing care and physical, occupational, respiratory, and speech therapy from licensed professionals that may or may not be needed on a daily basis.
  • Custodial care is the most commonly used type of care. It includes help with day-to-day activities such as eating, bathing, and dressing.

How much coverage do I need?

It is important to take the following into consideration when choosing your coverage options:

Level of Assets You Want to Protect

Long term care insurance should be a consideration in your overall retirement planning. Needs, resources, and situations differ, a Long Term Care Insure professional advisor will guide you through your long term care insurance options to implement the coverage that is right for you.

Current Cost of Care Where You Live or Plan to Retire

The cost of care varies by state and by region. Whether you plan to move to a warmer client or closer to loved ones when you retire, where you end up is an important factor in deciding what amount of coverage you will need. Our interactive Cost of Care map will help you estimate your needs.

Length of Time You’d Like Coverage

People need long term care assistance for an average of three years, according to the Boston College Center for Retirement Research.* It is important to take into consideration your health and family history of illness (e.g. a prolonged illness or Alzheimer’s disease) that may require long term care for a shorter a longer period of time.

Inflation Protection

Inflation protection is an important piece of long term care planning. It is important that your benefits keep pace with the increasing cost of care. Assuming 5% inflation over the next 15-years, the benefit required to cover your long term care costs will have more than doubled.

*Center for Retirement Research at Boston College, “How Can We Improve Long-Term Care Financing,” June 2008.

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