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Long-Term Care Insurance: What You Need to Know

January, 2018

There is a saying, “Do something today that your future self will thank you for.”

Never has a statement been truer than when discussing the purchase of insurance. Yes, it can be tough to write a check for something you may never use, but insurance is a safety net, protecting you, your family, and your assets. By 2050, the number of individuals using paid long-term care services in any setting will likely double from the 13 million using services in 2000, to 27 million people.

Most people are familiar with the standard insurances we need: health, auto, home and even life insurance. But what about long-term care insurance? Is this something everyone needs? When should you purchase it? And, what is it used for?

Let’s break down the basics.

What is it?

Unlike traditional health insurance, long-term care insurance is designed to cover long-term services and supports, including personal and custodial care in a variety of settings such as your home, a community organization, or other facility. This includes assistance with routine daily activities, like bathing, dressing, or getting in and out of bed.

In short, a long-term care insurance policy helps cover the costs of care when you have a chronic medical condition, a disability or a disorder such as Alzheimer’s disease. Older adults often find themselves in need of this type of care—and if they don’t have adequate savings—they may quickly drain funds.

The U.S. Department of Health and Human Services found that among 65-year-olds, 70% will use some form of long-term care in the years ahead.

Should everyone buy long-term care insurance?

Like any insurance plan, this is a personal decision that requires a great deal of research. If you don’t have long-term care insurance and find yourself in need of these services, you’ll need to pay for it yourself. Individuals with low incomes can receive some help from Medicaid, but only after exhausting savings. It’s also important to note that if you rely on Medicaid, you’ll have limited choices when it comes to selecting care providers.

Given the high likelihood that many will need this type of care at some point, long-term care is a wise investment. However, the price for the insurance needs to be right too. Purchase it too late and you will pay dearly. Buying long-term care insurance might not be affordable if you have a modest income and little savings.

When is the right time to buy long-term care insurance?

Most people look at purchasing this type of coverage in their 50s. The older you become, the more expensive the plan. Like life insurance, you’ll pay less when you’re younger. If you're older, or have a serious health condition, you may not be able to get coverage—and if you do, you may have to spend considerably more.

Where can I purchase it?

You can contact an insurance agent or broker for individual long-term plans. You might also have the ability to purchase a plan through your employer. Just make sure you know the rules about how your investment will be handled if you leave the company. You might be able to maintain the coverage if you continue to pay the premium.

Consider reaching out to The State Health Insurance Assistance Programs (SHIPs). This organization provides free, in depth, one-on-one insurance counseling and assistance to Medicare beneficiaries, their families, friends, and caregivers in all 50 states.

How does it work?

Once you start the journey to acquire a long-term care policy, you’ll need to go through several steps.

  1. Fill out an application.
  2. Answer health questions. Perhaps provide medical records, or go through an interview.
  3. Choose the amount of coverage you want. The richer the policy, the more you will pay.
  4. Begin paying your premiums. Note that premiums can go up year-to-year.
  5. File a claim if you do find yourself in need of long-term care. The insurance company will review it, and may require you to pay expenses out-of-pocket for 30, 60 or 90 days before reimbursement kicks in.

Most policies pay up to a daily limit for care until you reach the lifetime maximum.

Insurance research isn’t pleasant—or easy—but it is best to know the facts and understand what is best for you, given your long-time financial plan and health.

Dig in and plan. It could save you a lot of heartache and money in the future.

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