Is long-term care insurance right for you?

by Patricia LaCroix, Contributing Writer

While many of us might not want to face the fact, the truth is — assuming all goes well — we will continue to grow older.

Are you planning well for the inevitable? What can you do to ensure that you will be able to afford the care services you will most likely need later in life?

One option that you might not be aware of is “long-term care insurance.” Read on to learn more about what it is and how it can help you and your family in the future.

What is long-term care insurance?

Long-term care insurance is insurance designed to help cover expenses for those who have developed a chronic illness, disability, or condition that affects one’s ability to care for one’s self for an extended period of time.

Why would it be necessary?

Unfortunately, most health insurance plans, including Medicare, will not cover expenses long, extended periods of care, especially what is called “custodial care.” Custodial care includes services such as grooming, feeding, and attending to other basic daily living needs.  As such, in-home living care services and nursing homes are generally not covered.

Many adult children who are now caring for their elderly parents with daily living needs are realizing just how expensive such long-term care can be out of one’s own pocket. Sadly, in many cases, the funds just don’t exist to provide adequate care and respite for family caregivers. These situations are causing many to realize that better planning now for their own financial burdens at an older age would be wise — and that plan might include long-term care insurance.

To help you figure out just how much your own long-term care might cost you and your family in the future, AARP includes a “long-term care calculator” on their website. Click HERE to check it out.

What does long-term care insurance cover?

Policies vary in coverage, but typically, long-term care insurance covers:

  • Skilled nursing and skilled nursing facilities (often called a “nursing home”) — when extended, daily medical care is needed
  • Intermediate care — when medical care is necessary and extended, but not necessarily on a daily basis.
  • Custodial care — this is assistance with the everyday activities of life, such as bathing and grooming, using the toilet, cooking, eating, traveling to and from appointments, shopping, and cleaning the home. This type of care can include assisted living facilities as well as in-home care providers and adult daycare.

Be careful, as there are limits to how much the insurance will payout, and many policies also will deny coverage completely for certain situations, such as self-inflicted wounds or drug abuse. There even might be exclusions for something that might seem to be a given — such as Alzheimer’s or diabetes. So be sure to read any policy carefully before purchasing and watch out for limitations and exclusions.

How much does long-term care insurance cost?

Again, cost varies, but there are some things you’ll want to take into consideration.

Long-term care insurance tends to be cheaper when its bought while the intended recipient is younger and in good health. And if you do have a health problem, you might find yourself ineligible for any coverage.

Also, you’ll want to weight the cost of long-term care insurance in terms of your own personal financial situation. For example, long-term care insurance premiums can be expensive, and often the premium goes up as time goes by. You might risk losing years of paying for the investment if you decide at a later point that you no longer can afford the premiums. It might be better in some cases to create a different means of saving and investing the money you anticipate needing in the future rather than buying insurance — for example, investing into a Health Savings Account (HSA).

However, there are some tax benefits to using insurance. Generally, the insurance payouts are not considered income and won’t be taxed as such. You also might be able to get a related tax deduction. Talk to your accountant to learn more.

Is long-term care insurance the solution?

Only you and your family can decide if long-term care insurance is the answer to these future issues. But now that you know what it is and how it works, you can better decide if long-term insurance is right for you. If you decide to go that route, be sure to shop around for the best price and the coverage that makes the most sense for your particular situation.

The main thing to keep in mind is that planning — however that’s decided and done — is essential so that you are prepared to meet your future needs. To learn more information to make the most sound decision, click HERE to view and download the AHIP’s comprehensive brochure, “Guide to Long-Term Care Insurance.”