Be Prepared for Long-term Care

As we cruise through our busy lives, the future is an exciting realm. The plans we make involve exotic trips, family reunions or challenging new achievements. The last thing on our minds may be exactly what many of us, or our loved ones, will eventually face: the need for some type of long-term care (“LTC”).

Although it isn’t a pleasant thought, it’s much more unpleasant to confront the need for LTC when you haven’t planned for it. That’s where insurance planning comes in.

Discover How Insurance Can Help

LTC insurance policies help pay for the cost of long-term nursing care or assistance with activities of daily living (“ADL”), such as eating or bathing. Many policies cover care provided in the home, an assisted living facility or a nursing home, although some policies restrict coverage to only licensed facilities. Without this coverage, you’d likely need to pay these costs out of pocket.

Medicare or health insurance policies generally cover such expenses only if they’re temporary — that is, during a period over which you’re continuing to improve, such as recovering from surgery, a stroke or other medical conditions. Once you’ve plateaued and are unlikely to improve further, health insurance or Medicare coverage typically ends.

That’s when LTC insurance may take over. However, you need to balance the value of LTC insurance benefits with the  high cost of premiums, which can run several thousand dollars annually.

Decide If and When to Buy a Policy

Whether LTC insurance is the right fit for you will depend on a variety of factors, such as your net worth and your estate planning goals. If your financial portfolio includes substantial savings and investments, you may prefer to rely on them as a potential source of LTC funding rather than paying expensive premiums for insurance you might never use.

If you’ve put away less and would like to leave your heirs with some extra funds, LTC insurance might be a good solution. But, it will be effective only if your premiums are reasonable.

If LTC insurance is right for you, keep in mind that the younger you are when you purchase a policy, the lower the premiums typically will be. The possibility of being declined for a policy increases with age. Certain health conditions, such as Parkinson’s disease, can also make it more difficult, or impossible, for you to obtain an LTC policy. If you still qualify to get coverage, it likely will be much more expensive.

So buying earlier in life may make sense. But, you must keep in mind that you’ll potentially be paying premiums over a much longer period. You can often curtail premium costs by choosing a shorter benefit period or a longer elimination period.

Get to Know the Terminology

It helps to understand a few terms when considering an LTC policy:

Benefit trigger. This is the criterion the insurer uses to determine when your need for LTC begins. Examples include cognitive impairment or the inability to perform several ADLs on your own.

Elimination period. This is the period of time between the start of the benefit trigger and the time that the policy begins paying benefits, which can range from 30 days to several months. The longer the elimination period, the less expensive the premiums typically are.

Benefit period. This is the period of time over which the policy pays for care. This can range from a year or two to an unrestricted amount of time.

Inflation protection. This boosts the dollar value of the benefit for each year of the policy. It becomes more important if it’s likely you won’t begin to receive benefits for a decade or more.

Exclusion. An exclusion is a condition not covered by a policy. For instance, some policies won’t cover treatment for addictions or self-inflicted injuries.

Reimbursement or indemnity. With a reimbursement policy (which is the most common type), you’re paid for the costs you incur up to a set daily or weekly limit. The policy may require that care be provided in a licensed facility.

Under an indemnity policy, you receive a set amount of money to use against your expenses, even if your bill is less than the amount allowed by the policy. For example, if your caregiver sends you a bill for $150, but your policy is for $200, you would receive the full $200. To no surprise, indemnity policies tend to be more expensive.

Get Good Advice

There are many factors to consider when planning the future, and LTC insurance is no exception. A financial advisor can help you sort through the options and create the best LTC funding plan for you.

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