Understanding Long-Term Care Insurance

Long-term care refers to the help that people with chronic illnesses, disabilities or other conditions need on a daily basis over an extended period of time. This need can range from assistance with simple activities such as eating, dressing or bathing, to skilled care provided by therapists or nurses.

With nursing home care in some parts of the U.S. costing as much as $10,000 per month, long-term care can deplete even the best-planned estate. As a result, many seniors are opting to purchase long-term care insurance to cover this risk. An advantage of this insurance is that most policies now cover home care, personal care and assisted living care as well as nursing home care.

Policies offer many different coverage options. Since you can’t predict what your future long-term care needs will be, you may want to purchase a policy that has flexible options so that you can adjust it according to your needs in the future. Depending on the policy options you select, long-term care insurance can help you pay for the care you need, whether you are living at home, in an assisted living facility, personal care home, or a nursing home. Long-term care insurance may also pay expenses for adult day care and some policies will even help pay costs associated with modifying your home so that you can keep living in it safely.

Here are some factors you should consider when selecting a long-term care policy:

  • Age and Health- Policies cost less if you purchase them when you are younger and in good health. If you are older and not in good health you may not be able to get coverage, or you will have to spend a premium to get it.
  • Premiums- Will you be able to afford the policy’s premiums–not only now but in the future too? Premiums tend to increase over time and your income may go down. If you find yourself unable to afford your premium, you could lose all the money you invested in your policy.
  • Income- If you are having difficulty paying your bills now and are concerned about them in the coming years, you may have fewer assets and spending thousands of dollars a year for long-term care insurance might not make sense. If you have a low income and few assets, you may qualify for Medicaid; although, in order to qualify you must exhaust almost all of your resources first.
  • Support System- You may have family and friends who can provide some of your long-term care for you. Consider if you want them to help and how much you can expect them to help you.
  • Savings and Investments- A financial advisor or a lawyer who specializes in elder law or estate planning can advise you on ways to save for future long-term care expenses and the pros and cons of purchasing long-term care insurance.
  • Taxes- The benefits that are paid out for a long-term care policy are generally not taxed as income.

Having long-term care insurance can be a lifesaver for a senior needing care, as well as for their spouse and family. Consider these factors when purchasing long-term care insurance and speak with your financial advisor or an elder law attorney for more information to help you create a plan that makes sense for your family and financial situation.

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