Long-Term Care Insurance is a type of insurance policy designed to help cover the costs associated with long-term care services. These services may include assistance with activities of daily living as well as skilled nursing care, rehabilitation, and supervision for individuals with cognitive impairments.
Provide Financial Protection For Your Loved Ones and Better Care Options For You
Long-term care refers to a range of services and support provided to individuals who are unable to perform certain activities of daily living (ADLs) independently due to chronic illness, disability, or cognitive impairment. This type of care is typically required over an extended period, often for the remainder of a person’s life.
While long-term care insurance can provide financial support and relief for older people in a nursing home, you don’t have to be older to need long-term care, and it provides care other than being in a nursing home. Beyond providing you with the financial resources for better care, long-term care insurance is also essential to protecting the financial assets you’ve built during your life. Many families struggle to pay the unexpected cost of a long-term nursing home or in-home care. Such an event frequently jeopardizes the house, savings, and other assets.
Long-term care insurance provides financial protection for family members. Without a plan, the need for long-term care can be financially and emotionally devastating for everyone involved.
Your Murphy Insurance trusted professional can help by explaining long-term care insurance options and suggesting ways to improve your protection.
What Is Long-Term Care?
Long-term care assists with any chronic or disabling condition that prevents you from performing activities associated with daily living and requires services for dressing, eating, bathing, continence, toileting, and transferring. You don’t have to be elderly to require some of these types of services. These services can include:
- In-home Healthcare
- Adult Daycare
- Assisted Living Care
- Nursing Home Care
- Respite Care
- Hospice Care
Why Do I Need Long-Term Care Insurance?
Long-Term Care is Expensive. It is Essential to Protect Your Assets
Looking at the costs, you can see why most people can only afford to pay for services out of their pocket for a short time. The average cost for a nursing home in Massachusetts is $273 per day, excluding costs for therapy, rehabilitation, or medications, with stays averaging 2 ½ years. (Source: www.aarp.org) Assisted living facilities costs vary widely, ranging from $1,000 to $5,000 per month, depending on the type and quality of the facility. The average cost for home health care is about $20 per hour. If you need 4 hours of care daily, that adds up to $29,200 annually. (Source: www.eldercare.org)
If you have a family history of certain chronic health conditions, you may be at greater risk, making it more important to consider long-term care protection. If you are elderly, the primary purpose is to protect assets for a spouse or other family members; therefore, you need to consider the amount of assets you need to protect compared to the cost of insurance. A standard guideline financial experts use is that premiums should not cost a senior more than 5% of their income; however, this is a general rule, and you may have extenuating circumstances in which long-term care insurance would make sense.
Medicare Does NOT Pay for Most Long-Term Care Services
It doesn’t pay for custodial care if it is the only type needed. Also, skilled nursing facility care is only covered on a limited basis. If you do qualify, it provides care for a limited amount of time and will require a co-payment after a short amount of time. Home health services are also approved only under certain circumstances with limitations.
Medicaid Eligibility Has Strict Low-Income and Asset Requirements
Medicaid, the government program currently the primary source of funding for most long-term care, requires extremely low income and assets. Suppose you and your spouse have saved for retirement or have substantial savings that you hope to pass on to your family, and one of you needs to enter a nursing home; the high cost of care would mostly wipe you out financially and force the spouse who doesn’t require care to face a significant lifestyle change. More than half of those who enter nursing homes paying privately for care reach the low-income and asset requirements in less than a year. Having a plan to fund long-term care and protect your assets is crucial.
How Does Long-Term Care Insurance Work?
Every long-term care policy is slightly different. Policies can vary regarding when coverage takes effect, how long benefits will last, and how much you will receive. Understanding the differences between policies as you compare options is important. This is why having a trusted Murphy Insurance professional is extremely valuable.
When Does Long-Term Care Insurance Take Effect?
Most policies have a “waiting” or “elimination” period that will apply before benefits start, ranging from days to a year. The length of this period will generally affect the premium price.
Also, policies generally require that certain criteria be met for the coverage to take effect and that you don’t necessarily start paying when you feel it is appropriate. It is essential for you to understand the criteria required for the policy you are considering before making a purchase.
Some standard criteria include:
- Doctor’s certification that a specific type of care is medically necessary.
- Demonstration of an inability to perform a certain number of daily living activities, i.e., getting in or out of bed, bathing, dressing, feeding oneself, etc. Failure to perform just one activity may not be enough; however, if you need long-term care or are disabled, multiple factors are often affected.
- Test of mental competence. This is required if a policy covers situations where dementia or other cognitive illness requires long-term care, even if the person can still perform daily functions.
Benefit Limits
Aspects that can differ significantly between policies and will impact the premium are:
- Maximum benefit limits – the total length of time and total dollar amount of coverage after which you need to make other arrangements for payment.
- Daily/monthly benefit limit – a specific amount that will be paid each day or month that long-term care is received, which requires additional costs to be paid out of pocket.
Understanding these factors is important as they can impact care, and they will be extremely important if you purchase long-term care insurance as part of an asset protection plan.
Eligibility and Other Considerations
- Eligibility. Your age and health can impact eligibility; therefore, if you are already ill or of advanced age, you may not find a policy for which you qualify or that you can afford.
- Co-Payments. Some plans will only pay part of the cost and require you to pay a portion of care costs. While this may require you to spend some of your funds, it can be significantly better than paying for everything on your own.
- Inflation Protection. The earlier you purchase a policy, the lower the premium. Keep in mind, however, that costs are always increasing, which may increase the importance that your policy has an “inflation protection” provision.
- Step-Down Provisions. Some policies offer this feature, which allows you to reduce the benefits you receive under the policy. Since premiums may rise over time, this can be an important feature that helps you afford a policy based on your income and needs.
- Third-Party Notice. Older adults who suffer from memory loss may miss a premium payment. This feature requires the long-term care insurance company to notify a specified third-party if a lapse in premium occurs before it can cancel a policy.
- Premium Waiver. If your policy doesn’t state that premiums are waived once you begin receiving benefits under a policy, you may have to continue to pay premiums while you are receiving care. If this is important to you, discuss it with your insurance professional.
NOTE: This information is only a general description of the available coverages and is not a statement of contract. All coverages are subject to all policy provisions and applicable endorsements. Some coverage may be subject to individual insureds meeting underwriting qualifications and to availability within a state. For further information, contact a Murphy Insurance Agency Professional.
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