Long Term Care Insurance: An Overview

By AGIS Staff, AGIS Network

As life expectancies increase, more of us are likely to need help not only with the standard health concerns associated with aging, but also with day-to-day living. This type of assistance, called long term care, can quickly become very expensive, whether it takes place at home or in a facility.

Long term care may include assistance with daily activities like eating and dressing, health monitoring, adult day care and other community programs, residency in an assisted living facility or nursing home, and other types of care.

Regular health insurance and Medicare don't cover these needs, and Medicaid is available only to those with very limited resources. If you're concerned about overburdening your family or being able to afford adequate care, that leaves long term care insurance.

This insurance can be expensive, but it can protect you and your family against potentially major expenses as you age, and give you more choice about the care you receive. The younger and healthier you are, the lower your premiums will be, so it's a good idea to start considering it as soon as possible.

Key features to consider

Long term care insurance policies vary widely, both in their standard features and in the additional riders available. Here are some of the most important factors to consider, each of which affects the premiums you pay.

  • Coverage. A policy may be limited to a certain type of location, such as your home or a nursing facility. Many policies cover a range of options, including assisted living, adult day care, and even care provided by a family member or friend.
  • Benefit triggers. In a typical policy, benefits begin when you can no longer perform at least two activities of daily living (such as bathing and eating) without help. Before buying a particular policy, make sure you understand the triggers.
  • Benefit limits. When the cost of care exceeds your daily or monthly benefit, you must pay the remaining balance. A policy may also have limits on your total benefits in terms of both time and money. Make sure you understand the details?some policies have separate maximums for different types of care.
  • Elimination or waiting period. During this period, you must pay all of your long-term care expenses. The shorter the waiting period, the higher your premiums.
  • Inflation protection. As health care costs continue to rise, inflation protection becomes essential. The two main types of inflation protection are automatic coverage increases and the right to add coverage later.
  • Non-forfeiture benefit. A policy with this feature may provide coverage even if you're unable to continue paying premiums.

As you can see, long term care insurance policies can be complicated?and the above list doesn't cover every aspect you should consider. Before buying any policy, make sure you understand all of its terms. An accountant or financial advisor can help you decide whether a policy is right for you.

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