It is often said that if you need long-term care insurance you cannot afford it and if you can afford it you do not need it. In many cases this maxim is true. This brief article will discuss some of the basics of long-term care insurance.Obviously, long-term care insurance provides payment for time that the insured spends in a nursing home. These policies also provide payment for time that the insured spends in other types of inpatient and outpatient settings as well. These settings include skilled nursing, intermediate nursing, custodial care, home health care, adult day care, and respite care facilities. Older policies do not expressly provide coverage for some of these non-nursing home facilities; however, the insurance providers (primarily due to state laws) agree to provide coverage for these facilities as well.

Long-term care coverage begins either upon a period of prior hospitalization (for older policies) or the inability of the insured to perform two or three of the specified “activities of daily living” (for newer policies). The “activities of daily living” include dressing, eating, bathing, walking and toileting or maintaining continence.

The factors that impact the cost of long-term care insurance polices include the company that writes the policy, the level of benefits, the elimination period, the length of the benefit period, the age of the insured, and whether any riders are added to the policy.

The actuarial assumptions used by the insurance companies vary, so it is often helpful to shop for long-term care coverage with multiple insurers. Benefit levels are usually expressed in terms of years and dollars (with three or five years of coverage with a $100 to $150 maximum daily benefit being common). Long-term care policies generally are not written for insureds over the age of 70, due to the increased chance that the insured use the policy. Insureds often add non-forfeiture benefit riders (which typically return all premiums that were paid if the insured lets the policy lapse), waiver of premium riders (which typically allow the insured to discontinue premium payments after a period of time after the start of the policy benefits), and inflation protection riders (which typically provide automatic increase in the daily benefit at an annual rate).

The cost of inpatient nursing home care can exceed $60,000 per year and long-term care expenses typically are not covered by Medicare or by private medical expense insurance. Thus, individuals should meet with their financial advisor to discuss each of these features and riders. This is especially true for owners of long-term care policies that were written several years ago.

By: Robert Klein
Klein & Klien Insurance Consultants
1811 Santa Fe
Houston, Texas 77703