The Basics of Long Term Care Insurance
Good news, the average life expectancy is 78.1 years, which means people are living longer these days. But are you financially prepared for getting old? Maybe you have been contributing to your retirement fund but have you thought about long term care insurance?
Even as life expectancy increases, so did health care coverage costs and nursing/assisted living home costs. According to a 2007 Genworth Financial survey, the average cost for a private room in a nursing home was $74,806 a year. This average rate changes depending on the amount of assistance the person needs. Long term care insurance (LTC) can help pay for assisted living accommodations and even cover those diagnosed with chronic illnesses.
A major consideration for purchasing long-term care insurance, according to the National Association of Insurance Commissioners (NAIC), is whether individuals have assets they want to protect, as the substantial annual cost of long-term care can quickly deplete even a sizeable nest egg.
On the other hand, if one's retirement savings are minimal or non-existent, he or she would likely qualify for Medicaid in a very short period of time, significantly diminishing the need for long-term care insurance coverage. According to the NAIC, consumers should not purchase long-term care insurance if they are currently on Medicaid or their only source of income is Social Security.
Six Special Considerations Regarding Long-Term Care Insurance
The NAIC advises consumers to make sure the following items are included in their long-term care policies:
An "outline of coverage" that clearly describes the policy's benefits, terms and limitations in detail. It is important to understand how much money the policy would pay, and how much the policyholder would be responsible for out-of-pocket.
A clear description of the elimination period. Some policies have a set number of days that must be spent in a nursing home or in claims status before the long-term care insurance coverage kicks in.
At least one year of nursing home or home healthcare coverage or both, including intermediate and custodial care.
The right to cancel the policy for any reason within 30 days of purchase and receive a full premium refund.
A guarantee that the policy cannot be canceled or terminated because of the policyholder's age or physical or mental health condition.
Consider an inflation protection option that periodically increases the benefit level without the need for the policyholder to provide evidence of insurability.