Choosing Long Term Care Insurance

When Alzheimer’s disease, an accident, stroke or aging leaves you incapable of performing activities on your own, long term care – in your own home, a nursing home or another residential setting – may become an essential part of your daily life.

Nearly 70% of individuals who reach age 65 will need long term care at some time in their life. Most health insurance programs do not cover long term care expenses. The state-funded Medicaid programs, for example, pay for some long term care, but only if you have already spent most of your savings or other assets.

Protecting your assets and freeing your family members from concern and controlling where and how you receive long term care services are all good reasons to investigate this peace of mind option.

What does long term care insurance cover?
While long term care policies vary greatly with respect to premiums and benefits, most policies cover the cost of:

  • Nursing Home & Skilled Care facilities
  • In-Home assistance with daily activities
  • Adult daycare and other community based programs
  • Assisted living services, including meals, health monitoring and help with daily activities provided in setting outside the home
  • Daily nursing supervision for those with chronic illness

How much coverage should you buy?
Long term care policies come with a variety of features. But three key components that you select will greatly affect the cost of your policy.

  • Daily Benefit Amount: Nationally, the median cost of private room nursing home care is $240 per day, but costs vary considerably depending on the location and level of care needed.
  • Benefit Period: Nationally, the average stay in a nursing home lasts approximately 2.4 years, but 20% will stay longer than 5 years. Policies with a lifetime benefit period eliminate the worry that coverage will run out.
  • Elimination Period: Policies with short elimination periods are expensive. If your savings would cover a longer period, you may want to consider a longer elimination period which will reduce your premium costs.

 Additional features to consider

  • Inflation Rider: More than 1/3 of current nursing home residents are 85 or older. Someone who buys a policy at age 65 might not need coverage for almost 20 years. Over that time, the average cost of a nursing home stay might rise considerably due to annual inflation rates. The purpose of an inflation rider is to help ensure that your daily benefit amount keeps pace with the rising cost of long term care.
  • Benefit Triggers: Coverage often begins when a doctor certifies that you need assistance in performing 2 activities of daily living (ADL’s), such as dressing or bathing. A policy with an additional trigger called “medical necessity” may be a good choice because it makes it easier to qualify for benefits.
  • Limiting Premium Increases: Insurers cannot increase the premium of a specific individual, but they can raise the premiums for a certain class of policy or increase a premium as you age. Be sure you understand under what circumstances your premiums can and cannot increase.
  • Guaranteed Renewability: A guaranteed renewable provision ensures the insurer cannot cancel or refuse to renew your policy as long as you have been paying your premiums.

When to Consider Buying
The cost of nursing home and home care increases the longer you wait to purchase a policy and waiting carries additional risks. If you wait until you reach your 70s or 80s, failing health, policy restrictions or cost could make it more difficult to purchase long term care insurance. Many look at Long Term Care options starting in their 50’s.

Buyer Beware
Not all long term care coverages are beneficial for your circumstances and there are many options that you will want to be sure to include in your policy. As we review your current financial situation we will make sure that your potential Long Term Care needs are identified and any recommendations made are suitable for you.

Feel free to contact me if you have questions about your personal Long Term Care options.

(Listed content was originally created by MFS Fund Distributors, Inc. Boston, MA)