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Quick Guide To Long-Term Care Insurance

In 2008, the average daily cost of a semiprivate room in a U.S. nursing home was $191, according to the MetLife Mature Market Institute. That’s just shy of $70,000 a year. The average expense of a year’s stay in an assisted-living facility was $36,372. Paying for a home-health aide who visits three times a week ran about $18,000 per annum.

An extended period of care could burn through savings pretty quickly. To protect their assets, an increasing number of people are buying long-term care (LTC) insurance.

Coverage
Most policies cover nursing home care, assisted-living facilities, home care and adult day care.

Once it’s determined a person needs long-term care, a waiting, or elimination, period begins. When that time has passed, the policy begins to pay a daily benefit. The insured is responsible for making up any difference between the daily benefit and the cost of care.

Most policies exclude care for pre-existing conditions for a specific length of time, not longer than six months. During that period you’d have to pay out of pocket.

Finally, don’t assume government programs such as Medicare and Medicaid will cover long-term care. Unless you’re poor or have depleted most of your assets, they won’t.

Cost
It’s difficult to generalize about cost because premiums depend on so many factors, such as:

  • Your age
  • The level of benefits you choose
  • The amount of time before payments kick in
  • Whether you want coverage for a specific period of time versus lifetime coverage
  • Whether your policy includes inflation protection
A lower daily benefit, a longer elimination period and a shorter period of coverage, for example, could mean spending more of your own money in exchange for lower premiums.

According to the American Association for Long-Term Care Insurance, a typical 55-year-old who wanted $100-a-day coverage for three years would pay about $709 in premiums each year. A 65-year-old choosing the same level of benefits would shell out $1,342 annually.

Features
Policy language can be confusing. As you compare policies, check for the following elements:
  • Inflation protection, which means benefit amounts increase each year at a specific rate to cover the rising cost of nursing care
  • A guarantee that as long as you pay the premiums, your policy cannot be cancelled because of age or poor health
  • Coverage for cognitive impairments such as Alzheimer’s 
  • A wide range of covered services, including care in a nursing home or assisted-living facility, home-health care and adult day care 
  • Waiver of premiums during periods of home care or care in a nursing home or assisted-living facility (once the elimination period has been met)
  • Coverage for the nursing home or other facility of your choice rather than a plan-specified facility
  • The ability to have your own physician certify your need for care

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