Why Should You Invest in Long Term Care Insurance?

June 11th, 2015

As you grow older, the chances of needing someone to look after you might be much higher than you think. In fact, nearly 70% of people over 65 will require long-term care at some point in their lives. You shouldn’t rely on just your private health insurance policy to pay for long-term care, since most policies typically only cover hospital bills and doctor’s fees.

Even Medicare will only cover skilled care for a maximum of 100 days, if certain requirements are fulfilled. Your loved ones will always be there for you, but if you consider how much providing care for you would affect their lives, you’ll realize that plan is far from perfect too.

There are a variety of locations where long-term care can be provided and many insurance policies let you decide these, like:

  • Home Health Care – Long-term care provided at home
  • Assisted Living Facility – Housing provided in a residential care setting with support services
  • Memory-Loss Units – Often included as a separate wing in an assisted living facility, with 24-hour support and security to prevent patients from wandering off
  • Nursing Home – Dedicated facilities which provide full-time care
  • Adult Day Care – Daytime supervision, generally community-based, providing off-site recreational, social or health assistance during working hours

Long-Term Care Insurance – Put Yourself Back in Control

Being in a situation where you lose the ability to perform your daily functions on your own is uncomfortable enough. Long-term care (LTC) insurance helps ensure you’ll be able to afford high-quality care, without risking your assets or lowering your living standards to pay for it. In short, you’ll be able to retain your financial independence!

Key Features and Benefits

When you’re considering a long-term care policy, you need to be familiar with the various benefits and features.

Inflation Rider – A provision which increases benefits over time, to keep pace with increases in health-care costs, and can operate in a number of ways:

  • Inflation rider linked to the provider’s investment returns
  • Consumer Price Index (CPI) linked to inflation
  • Simple inflation rider (3%, 4% or 5%)
  • Compounded inflation rider (3%, 4% or 5%)
  • Guaranteed purchase option that offers a limited right to buy more coverage without new underwriting

Free-Look Period – A 30-day period after you purchase the policy, during which you can cancel it and your premium is refunded in full

Guaranteed Renewability – A feature that prevents the policy provider from cancelling your cover or increasing your premiums, except in some very specific cases

Non-Forfeiture Provision – If the insurer increases the premiums beyond a certain percentage, you will have the option to retain your coverage with lower benefits

Exclusions – For most policies, there are certain conditions which may be listed as exclusions like alcoholism, substance abuse, some illnesses and disorders, etc. Self-inflicted injuries are also almost always excluded

Payment Benefits

The payment benefits of a LTC insurance policy affect everything from the amount you can claim, to the amount you’ll have to pay from your own pocket.

Daily/Monthly Benefit – This is the maximum amount per day/month which your policy will cover towards long-term care costs

Benefit Cap – The maximum amount of benefit that is available under the policy

Elimination Period – The time period before the benefits will start being paid. Longer waiting periods mean lower premium costs

Shared Benefit Riders – A provision that lets a couple share benefits, so one partner can draw on the other’s benefits if they have exhausted their own