Those in need of long term care may need to put special plans in place to cover their costs. Long term care insurance (LTC) policies may be worth considering as part of the retirement planning process. How does this coverage work?
What is Long Term Care Insurance?
This kind of insurance is designed to help meet health care and associated costs for those that need long term care in various settings. Plans can, for example, help people to be given care in the home, in an assisted living or community facility or in a nursing home. In return for a regular premium or a set of payments over a period of time, the policy will pay for costs and services according to its terms when a claim needs to be made.
How Does Long Term Care Insurance Work?
Those looking for long term care coverage have various choices in terms of the benefits they may be given. Some will, for example, buy a policy that covers them on a comprehensive basis. This would allow them to choose where they received their care (i.e. in the home, in an assisted living facility or in a nursing home). Others opt for a facility-only policy. This cuts out certain options such as care in the home or the community.
The coverage given by a policy may vary. A consumer may, for example, choose a dollar limited benefit on an LTC policy that will provide benefits for a specified number of years to a set cash limit. So, for example, coverage could offer $200 of benefits a day for five years. The policy holder would then be given $365,000 as their overall maximum benefit.
Some insurers will also give an overall monthly cash benefit rather than a daily one. This could give the policy holder more flexibility on when they "buy in" their care and is popular with some. As an alternative, some will opt for lifetime or unlimited coverage. This would mean that benefits would not be limited by time or cost and would be paid for as long as they are needed subject to policy terms.
How Much Does Long Term Care Insurance Cost?
There are various factors that influence the cost of LTC policies. As a general rule, these include:
- The age of the policy holder.
- Their general health.
- The benefits that are purchased.
- The term of the deductible.
- Any optional benefits that are purchased (i.e. inflation protection and nonforfeiture benefits).
Older consumers with pre-existing medical conditions may find that the costs of LTC policies are higher than the norm due to the increased risk that they pose. In some cases, existing health conditions may mean that coverage is refused or limited. The Medicare long term care planning tool may be a useful way to look at different options.
There are other ways to pay for long term care that may be better options for some consumers. Some will, for example, use longevity insurance as a way of accessing funds later in life. Others will use their general retirement savings or may set up other kinds of annuities that include a long term care or nursing home benefit rider.
Source: National Clearinghouse for Long-Term Care Information
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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