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Long Term Care Insurance

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The Basics of Long Term Care Insurance

Not surprisingly up to 70% people turning 65 will need long-term care for an average of three years.

Statistics show that 58% of men and 79% of women aged 65 and older will require long-term care at some point, and that average lengths of care can range between 2.2 years for men and 3.7 years for women.

The average cost of a semi-private room in a nursing home is currently around $225 a day or $6,884 per month. In-home caretaker services, on the other hand, can cost a little over $25 an hour.

Services for an extended period of five years, for example, would add up to a stagerring $410,940, without accounting for inflation.

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What Is Long Term Care Insurance?

People often pay for long-term care out of their own pocket, depleting their personal resources and straining family relationships and savings.

Those who can afford it, however, opt for long-term care insurance products instead that pay out either a daily or monthly benefit amount or follow a “pool of money” approach to cover services such as:

  • Skilled Care – Provided by skilled nurses or physical therapists, most often in a hospital setting.
  • Intermediate Care – Services between hospital and home, provided by skilled professionals.
  • Custodial Care – Assistance with daily living activities often provided by a health aide.
  • Home Health Care – May include in-home personal care provided by a licensed nurse or home health aide and may include a skilled nurse for a person recovering from an accident or illness.
  • Homemaker Services – Typically offered by home health care agencies and include personal care or assistance with daily living activities such as eating and bathing.
  • Community Services – These are services offered in skilled nursing homes, assisted living facilities, and adult daycare centers.
  • Transportation  Some community care and senior housing centers provide transportation as part of their offer.

Health insurance covers medical and hospital bills, however Medicare and Medicaid only cover some long-term care expenses under particular circumstances and limit the days coverage is provided.

What Does Long Term Care Insurance Cover?

Long-term care insurance helps policyholders, and often their spouses, cover the costs of care, whether associated with cognitive impairment, long physical illness, or other disability.

Most require policyholders to be unable to perform at least two out of six “Activities of Daily Living” or ADLs.

Which include:

  • Bathing
  • Self-feeding
  • Dressing
  • Toileting
  • Personal Hygiene
  • Functional Mobility (Transferring & Walking)

Premiums & Elimination Period

Benefits begin once the insured has required assistance with at least two activities of daily living for a specified timeframe known as the elimination period. Policyholders determine the length of the elimination period, yet typical options include 30, 60, 90, 180, and 365 days.

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Long Term Care Insurance Options

Hybrid Policies

These policies include a life insurance portion linked with a long-term care rider. There are also annuity products where an existing insurance policy can be “linked” to a long-term care rider.

Benefit Riders

Additional options, called benefit plan riders, allow insured individuals to customize the terms of their policies or add benefits to their coverage for an additional cost.

Riders may include:

Inflation Rider

This allows for daily maximum benefit amounts to increase by a fixed percentage every year for a predetermined number of years.

Increased Benefits

This rider to increases the daily maximum benefits or the lifetime benefit limit on your existing policy.

Spouse Survivorship

When one spouse dies, the surviving spouse on the policy will no longer have to pay their long-term care insurance monthly premiums but will still receive coverage.

Shared Care

Allows you and your spouse to pool your long-term care insurance benefits rather than requiring each person to have their own policy.

Return of Premium

Upon the death of the policyholder, a portion (and in some cases, all) of the total amount of premiums paid for the policy will be returned to the designated beneficiary. These types of plans typically can increase rates by around 50%.

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