Understanding Long-term Health Care Insurance

Source: AARP.org

Long-term care refers to the many services used by people who have disabilities or chronic (long-lasting) illnesses. Long-term care insurance helps you pay for these services, which can be very expensive. A policy also ensures that you can make your own choices about what long-term care services you receive and where you receive them.

What You Should Know

Ordinary health insurance policies and Medicare usually do not pay for long-term care expenses. Medicaid, a federal/state health insurance program, will only pay for long-term care if you have already spent most of your savings or other assets. Long-term care insurance should cover the cost of:

• Help in your home with daily activities like bathing and dressing.
• Community programs, such as adult day care.
• Assisted living services that are provided in a special residential setting other than your own home. These services can include meals, health monitoring, and help with daily activities.
• Care in a nursing home.

Deciding Whether to Buy a Policy

Long-term care insurance is not for everyone. Learn as much as you can about the various policy options before you buy a policy. Call your state agency on aging to get free or very low-cost help in deciding whether to buy long-term care insurance. Keep the following in mind:

• Make sure you have a good reason to buy long-term care insurance. Your goals should be to protect your assets, minimize your dependence on other family members, and control where and how you receive long-term care services.
• Consider the cost. Long-term care insurance is expensive. An individual who is 65 years old and in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing home care and home care, and whose premiums are adjusted for inflation. Be wary of buying long-term care insurance if the cost of premiums will lower your standard of living or force you to give up other things you need. Make sure you'll be able to afford the premiums if your income declines.

Deciding When to Buy a Policy

Middle age is the best time to consider whether to buy long-term care insurance. That's when you're most likely to be eligible for a policy, and when premiums costs will be at their lowest.

Many people don't think about long-term care until they get into their 70s and 80s and their health begins to fail. At this age, it may be too late to purchase insurance. Some long-term care insurance policies have restrictions on the age and health status of potential buyers. Even if you can obtain long-term care insurance in old age, it will be more expensive than if you bought a policy when you were younger.