Why Long-Term Care?

As an important component of any sound financial plan, insurance can help protect your assets and alleviate the fear of unexpected losses. With an aging population and increasing uncertainty about the future of Social Security, insurance to cover the staggering costs of nursing homes or at-home health care is becoming more widespread.

While no one likes to anticipate a time when he or she might need long-term care services — including help with daily activities — it is important to be informed about the costs, payment options, and resources available so you can make educated choices about your future.

Many Americans underestimate the cost of long-term care and are unaware of how such care is funded. According to a 2006 study by the American Association of Retired People (AARP), three in five Americans older than 45 say they are at least “somewhat familiar” with long-term care services currently available, yet less than one in 10 (8 percent) could correctly estimate the monthly cost of a nursing home within 20 percent of the national average (www.aarp.org/research).

How can long-term care insurance help?

The term “long-term care” encompasses a wide range of health and support services that people require as they age or if they are disabled due to a physical disease, prolonged illness or cognitive disorder.

The type of care required is often full-time, thus very expensive. There are a few different ways to pay for this care: cash, Medicare, Medicaid, and long-term care insurance. If you are fortunate enough to be in a position to pay for long-term care in cash out of your own funds, it might be a good option to do so. Consider consulting with a financial adviser who can evaluate your portfolio and provide you with individualized guidance on your situation.

According to the previously cited AARP study, 59 percent of Americans think Medicare will pay for an extended nursing home stay, but this is not the case. Fifty-two percent incorrectly believe Medicare covers assisted living costs. Medicare will pay for some care including doctor’s services and skilled, short-term, medically necessary care, but only when coming from a hospital stay to the facility and only for a limited period of time.

Medicaid will eventually pay for your long-term care expenses, but only after the majority of your personal assets have been depleted. Long-term care insurance works like any other insurance policy — the purchaser pays a premium for a policy that will help cover the costs of long-term care services in the event they are needed.

Most long-term care policies cover a range of services including nursing homes, assisted living facilities, home health care, and adult day care. Coverage is usually dependent on current health status and rates are based on age at the time of purchase.

What makes a good long-term care insurance policy?

The best long-term care policies come from financially stable companies, have reasonable deductibles, cover a broad array of services, and offer inflation protection. Given that health care costs have been increasing faster than the general rate of inflation over the past few years, it is important to be protected against quickly rising costs.

You should also consider the daily benefit you would like as well as the scope of your coverage. You’ll want to feel secure knowing that the policy you purchased will adequately cover your costs. You don’t know exactly what type of care you may need in the future, so knowing that your long-term care insurance policy covers a range of services can offer peace of mind. Be sure to ask about the company’s claims process. Have one of our company representative's walk you through the steps needed to file a claim and find out what percentage of claims are actually paid.