Many of us would consider a hospital stay of more than a day or two a long time to be under medical care.
But what about if you’re seriously injured in a car accident, have a heart attack or develop Alzheimer’s disease? Then a stay in a health care facility could last weeks, months or years. That’s when long-term care insurance can limit the financial damage that can follow an injury or the onset of a serious disease.
Long-term care goes beyond medical care and nursing care to include all the help you could need if you ever have a chronic illness or disability that leaves you unable to care for yourself for an extended period of time.
Just as long-term care is not limited to the setting in which it is received, neither is it limited to the age of the recipient. A young adult or middle-aged person might need long-term care due to an accident or illness, just as likely as an elderly grandmother might need those services for a chronic condition such as heart disease.
For insurance purposes, long-term care is not limited to the services or treatments delivered in a hospital setting. Long-term care covers time spent in a nursing home or assisted-living facility – and even care you receive in your home.
Many services are available outside nursing homes, delivered by visiting nurses, home health aides, visitor and meal delivery programs, caregiver respite services or provided in adult daycare centers.
The vexing problem for so many families is that lengthy periods of medical or nursing home care mean spending lots of money.
How much depends on the level of services you need and the length of time you need them. A year in a nursing home can average more than $50,000. Assisted-living facilities can about $24,000. Home care is less expensive but still costly, perhaps $1,000 a month.
That’s more than a year of mortgage or car payments. You’re probably asking yourself, “How will I ever afford to pay that much?” Generally, your typical health insurance policy isn’t going to cover long-term care.
Well, that’s what Medicare is for, isn’t it? Yes, to a point.
Medicare pays for a limited amount of long-term supportive services – up to 100 days of care in a nursing home. Medicare doesn’t cover long-term care (also called custodial care), if that’s the only care you need. In this case, you may need to look into a supplemental insurance to cover any out-of-pocket costs not covered.
Typically, individuals and their families pay about one-fourth of all nursing home costs out-of-pocket.
Long-term care insurance is generally available through groups, such as your employer, and to individuals directly. The coverage and costs vary and depend on the benefit levels you choose.
An indemnity or “per diem” policy pays up to a fixed amount. With such a policy, you choose the benefit amount and are reimbursed for medical expenses up to a certain amount of money per day.
There are also “pooled benefit” policies, which provide money that may be used for different types of services. These also have limits based on daily, weekly or monthly periods.
You choose a daily benefit amount for the insurer to pay and you pick up the rest of the tab.
Some life-insurance policies include an option for long-term care benefits. Under certain circumstances a portion of the life insurance benefit is paid to the policyholder for long-term care services instead of to the beneficiary at the policyholder’s death.
Just like a standard life insurance policy, what you pay for long-term care insurance will depend on certain factors, such as your age, how much coverage you want, when you want that coverage to start and how long you want benefits and payments to last.
And, just like life insurance, the younger you are when you buy the policy, the lower your annual charges.
That doesn’t mean your premiums will stay the same until the end of your life. On the contrary, charges may rise if the insurer raises the cost for the entire group of policyholders to which you belong.
Also, most policies offer inflation adjustments. The initial benefit amount will increase automatically each year at a specified rate, compounded over the life of the policy. Inflation adjustments can add between 40 percent and 100 percent of your premium.
All policies contain limits and exclusions. Alzheimer’s disease is virtually always covered, but some mental illnesses and nervous disorders are not included. Alcoholism and drug use are usually not covered.
So, before you buy long-term care insurance, ask yourself some important questions: Do I understand what is – and is not – covered? Do I understand what it is I am buying and for how long it will last? Will I be able to afford this coverage as I age and my income becomes limited?
What other questions do you have about long-term care insurance? Let us know in the comments below!