What is Long Term Care & Who Should Purchase Long Term Care Insurance?

Long term care goes beyond medical and nursing care to include all the assistance possibly needed in the event of a chronic illness that would leave an individual unable to care for themselves for an extended period of time. Long term care can be received in an assisted living facility, a nursing home, or in one's own home.

Generally, neither Medicare nor private Medicare supplement insurance nor traditional health insurance will pay for long term care. Costs for long term care vary considerably based on geographic area. The national annual cost of one year in a nursing home averages about $70,000 and the cost of bringing an aide into a home three times per week to help with bathing, dressing, and preparing meals averages about $30,000 per year.

A study by the U.S. Department of Health and Human Service indicates that people age 65 have at least a 40% lifetime risk of entering a nursing home. About 10% will stay there five years or longer.

People in their 50s and 60s should consider long term care insurance if they:

• Will not be able to afford care in their elderly years.
• Have a small family that would not be able to care for them.
• Have family members who live far away.

Tips on Buying a Long Term Insurance Care Policy

Carefully do research on insurance companies, features, costs, and benefits before buying a long term care insurance policy.

Buy long term care insurance from only stable companies. Ratings from A.M. Best, Standard & Poor's, and other services can be found in most libraries. Make sure the policy includes inflation protection. Buy only a guaranteed renewable policy with premiums that remain fixed.

Figure out the break-even point of a long term care policy. How long would one have to be in a nursing home to get back all the premiums paid? A break-even point of one year is desirable. Keep in mind that longer elimination periods (the time before the benefits kick in) lowers the premiums, but the costs of the policy must be paid until the benefits start.

Buy insurance that combines home care and nursing home care. Avoid policies that require a hospital stay before benefits begin. Buy a policy that pays two-thirds to three-quarters of the daily rate at nursing homes in your particular geographic area. (National average is about $194 per day: $127 in Arkansas, $131 in Minnesota, $230 in New York, $158 in Virginia, and $182 in Florida.) Find a policy that covers cognitive impairment'in which people may be able to perform activities but must be reminded to do so. Alzheimer's disease should be explicitly covered.