Introduction to Long-Term Care Insurance

In the United States, the Baby Boomer generation is reaching retirement age and people are living longer. Many Americans now live 20, 30, or more years in retirement – in fact, some may even spend more time in retirement than they did in working years. From a financial standpoint, this means that individuals and couples must plan ahead not only for basic living expenses, but also for the high price of declining health.

The American population is growing older.
The American population is growing older.

When an individual begins to need assistance, he or she oftentimes relies on a spouse or other loved one for care. Families will typically go to great lengths to provide care for an elders who, due to a physical or cognitive impairment can no longer care for themselves. There usually comes a time, though, when they must turn to more formal types of care giving.

As more of us reach retirement age and beyond, it’s important to be aware of how much long-term care costs and how quickly these expenses can deplete a savings account. Long-term care insurance is one way of dealing with these costs.

The authors of this website have loved ones who are currently in need of long-term care, and one of us spent a few years in the LTC insurance industry. Between us, we’ve seen how it all works, and we’ve written articles, guides, and checklists to help you prepare. Whether you’re researching for yourself or a loved one, you’ll find the information that you need.

What is Long-Term Care?

Long-term care (LTC) refers to a variety of services that are necessary for someone who requires some form of daily, ongoing assistance. The needs of an individual can range from around-the-clock care to someone who needs help with performing activities of daily life (ADLs) such as bathing, getting dressed.

Long-term care is divided into different levels. These include:

  • Skilled Care – Skilled care constitutes continuous care that is provided by licensed medical professionals under the direct supervision of a physician. This type of care is considered to be medically necessary due to a mental or physical impairment.
  • Intermediate Care – Intermediate care is also considered to be medically necessary, and it is typically provided by a registered nurse (RN), licensed practical nurse (LPN), or a nurse’s aide, under the supervision of a physician.
  • Custodial Care – Custodial care is defined as receiving assistance with meeting daily living activities. This refers to the receipt of supervisory or hands-on services that are provided to people who suffer from a chronic illness that has been caused by a physical or cognitive impairment. This type of care may be provided by various formal (professional) and non-formal caregivers. Custodial care can include assistance with bathing, dressing, and other activities that help the patient get through his or her day.

How Much Does Long-Term Care Cost?

Depending on the types of services that are needed – and for how long – the price tag for long-term care can be quite high. According to the MetLife Market Survey of Long-Term Care Costs, the average daily rate in 2012 for a private room in a skilled nursing home was $248. This equates to an annual cost of more than $90,000.

While many people would prefer to receive care in their own home, the national average hourly rate for home health aides was $21 in 2012, with the hourly cost for homemaker services ranging between $19 and $21. Therefore, depending on how many hours per week care is required, home care can be costly as well.

Does Medicare Cover Long-Term Care Expenses?

There is a common misconception that Medicare will pay for most long-term care services. However, this is only partially correct. Nationally, Medicare only covers about 5% of all nursing home expenses – and the qualification parameters are stringent.

Even for those who do qualify, in 2013, there is a daily co-insurance requirement of $148 for days 20 through 100 that are spent in a skilled nursing home facility. If the patient must remain in the skilled nursing home beyond 100 days, he or she will be responsible for 100 percent of their expenses.

What is Long-Term Care Insurance?

Long-term care insurance can cover the cost of some or all of an individual’s expenses in a nursing home, assisted care facility, adult day care center, and care that is received in the policy holder’s home.

Most long-term care insurance policies will cover a specific dollar amount for each day or month that a covered insured spends in a care facility or receives home health care services. Today’s policies also offer additional benefits such as funds for installing wheel chair ramps or grab bars in a shower.

One of the most important aspects about long-term care insurance is that these policies essentially transfer the cost of a long-term care need away from an individual or couple – and can therefore help to preserve savings and other assets that would otherwise need to be spent on care.

How to Shop for a Long-Term Care Insurance Policy

When shopping for a long-term care insurance policy, it is important to choose a reliable insurance carrier. Applicants for coverage should therefore review an insurer’s financial strength and claims-paying reputation prior to moving forward. In addition, this website contains a number of guides, checklists, and other resources to help you find the insurance policy that you need.