Understanding Long-Term Care Insurance

Who, What, How, Why and When of Long Term Care

Americans today are living longer than ever before, with a substantial portion of their lives in retirement. The reality of this is that a large part of this retiree population will have to deal with poor health during these “Golden Years”. Since 1900, Americans 65 and over have more than tripled from 4.1% in 1900 to 16.5% in 2022, and the number has increased from 3.1 million to over 50 million.

The changing roles of the American family, also plays an integral part in the dynamics of Long-term care, women in the workforce, lower birth rates, divorce and increased mobility of family members. The challenge of long-term care is to find the right type of policy for your needs at an affordable price.

What is Long Term Care?

You’ll often see nursing home care referred to as “long-term care.” However, long-term care (LTC) generally refers to a broad range of medical, personal and environmental services provided to chronically ill, aged or disabled persons in an institution or in their place of residence. The typical need for long-term care arises when physical or cognitive conditions impair a person’s ability to perform the basic activities of daily living or ADL’s. Long –term care can be provided by informal caregivers (immediate family members or friends) or formal or professional providers, (physicians, nurses and therapists). There are three basic levels of long-term care:

Skilled care. Continuous around-the-clock care provided by a licensed health care professional under direct supervision of a physician and designed to rehabilitate or restore the care recipient.

Intermediate care. Intermittent care (three to four day/week) provided by an RN, LPN, and nurse’s aides under the supervision of a physician, and designed to rehabilitate or restore the care recipient.

Custodial care. Assistance in performing activities of daily living is provided by a number of professional and nonprofessional caregivers.

How Can Long Term Care Help Me?

The value of long-term care is not realized until an unfortunate medical event happens to someone. When the need for either in or out of home care occurs there are six sources of funds that can be used to meet long-term care expenses: personal assets and savings Veterans’ Administration benefits, Medicare, Medigap insurance, Medicaid and Long-Term Care insurance.

Long-term care insurance can create a financial safety net, which will prevent the spending and selling off of personal assets and savings. It can also work in conjunction with Medicare and Medigap insurances as well as VA benefits.

Policy Features and Benefit Design Options

As with any other type of insurance long-term care coverage can be customized for your individual needs. We can help you determine what is best for you – Contact us . There are two types of plans, tax-qualified and non-tax qualified.

A tax-qualified LTC policy is any insurance contract that provides only coverage of qualified long-term care services and meets the following additional requirements:

  • The contract must be guaranteed renewable.
  • The contract must not provide for a cash surrender value or other money that can be paid, assigned, borrowed or pledged.
  • Refunds under the contract (other than refunds paid upon the death of the insured or complete surrender or cancellation of the contract) and dividends may only be used to reduce future premiums or to increase future benefits.
  • The contract must coordinate benefits with Medicare (unless Medicare is a secondary payer) or the contract is a indemnity or per diem contract.
  • The contract must meet certain consumer protection standards.
  • The policy provides for necessary medical and diagnostic tests and treatments.
  • The patient is unable to do two or more ADL’s.

Plans that do not meet these criteria are nonqualified plans.

Standard policy features will include, a free look period for 30 days, guaranteed renewability, level premiums, waiver of premium and preexisting conditions limitation.

Standard benefit options can include, a range of elimination periods, and a defined per diem amount. Some plans offer an automatic increase rider, a “pay as you go” option and a benefit maximum based on a specific period of time or on a specific dollar amount.

As you can see there are many factors in determining what type of LTC policy you need. There are also many different LTC insurers all with individual company criteria and specifics. The best way to determine which policy is right for you is to contact us and discuss your needs with a financial advisor who has a good understanding of those needs and the policies that would best fit you individual situation.

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