Long Term Care Insurance

Planning for long-term care requires foresight. Review your coverage and protect yourself from potential financial harm.

People are living longer. For good and for bad, medical care has advanced to the point that you may people spend a significant time towards the end of your life needing some kind of medical assistance. It makes sense to look into long term health insurance, to see if it is the kind of policy you should purchase.

Long-term care (LTC) insurance pays benefits to you, if you bought insurance and you qualify for the care according to the terms of your policy. In general, a doctor must certify that you no longer can manage some "activities of daily living" on your own. If you need assistance with activities such as bathing, dressing, using the bathroom, or eating, then the policy benefits may apply. Benefits can cover various types of care, including nursing home care (when recuperating from a chronic injury or illness), in-home therapy services, assisted living and adult day care. Insurance premiums take into account factors including the age of the insured, the total benefit package in the policy, the benefit period (how long benefits are paid), whether there is a cost-of-living or inflation adjustment, and the size of the deductible.

Long-term care insurance can be a financial lifesaver at a critical stage of life, but it is very important for you to understand what you are buying.

Here are some elements for you to consider, before you choose to purchase a long-term care insurance policy:

1. Know if you will benefit from coverage. LTC insurance has the most benefit for you, if you need to protect valuable assets, such as savings accounts, from being depleted by care costs. If you are too wealthy to qualify for Medicaid, you must pay long-term care costs out of pocket until you have liquidated and spent enough of your assets to qualify. LTC insurance can be especially important to protect your spouse. If he or she needs the assets the two of you have in order to pay daily costs of living, the LTC prevents the spouse from spending out-of-pocket to provide the care.
2. Do not buy what you don't need. If you are part of a low-income household, with little or few assets to protect, LTC insurance is unlikely to be a wise investment. The costs of the premiums, which can cost $1,000 to $6,000 per year, outweigh the benefits. If you are having trouble paying your bills or have very few assets, you probably do not need – nor can afford – LTC insurance.
3. Your Age matters. The sooner you purchase long-term care insurance, the less you will pay in your monthly premium. Younger people get the best premiums because they are less likely to use the insurance soon. Typically, you do not need to consider buying LTC coverage until age 50 to 55. An exception to this is if you are younger, but your employer offers great LTC coverage.
4. Know what pulls the trigger."Triggers" are events that cause a policy to begin paying benefits. Understand your policy's triggers. Most policies require that the beneficiary no longer be able to accomplish two or three activities of daily living before benefits are paid. A doctor will need to certify that the condition is expected to last three months or longer.
5. Plan for premium increases. Choose a policy that is guaranteed renewable. This means the policy will continue as long as premiums are paid. It does not mean the premium will not increase. Be prepared for the cost to go up with time, although some major companies have not increased premiums for policy holders.
6. Non-forfeiture can help. If you are not 100 percent positive you can pay the premiums until you need the coverage, a non-forfeiture benefit can help protect some of your policy's value. But it will make the premiums higher throughout the life of the policy, so if you do not need it, avoid it.
7. Look for a waiver of premium clause. The waiver of premium clause arranges for the beneficiary to not pay premiums when receiving benefits. A waiting period of 60 to 90 days is common.

When LTC coverage is needed, it can bring real peace of mind. If it is the right choice for you, do not delay. Plan your care before you need it. Remember to shop around for the best policy and to speak with your tax adviser, as there can be tax benefits to purchasing LTC insurance.