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Understanding Long-Term Care Insurance

Personal Finance
man in wheelchair, grateful to have long-term care insurance, reads in the park with his granddaughter

Long-term care insurance is an option you could consider to help you take responsibility today for tomorrow's physical and financial well-being. No one wants to imagine a day when they may need to call on family to assist with daily tasks or personal care. But the reality is that you might very well need some form of long-term care.

In fact, 70 percent of 65-year-olds can expect to use some form of long-term care in their lifetime, according to the U.S. Department of Health and Human Services. Here, we will learn more about long-term care insurance and help you understand the basics of this policy type.

What Is Long-Term Care Insurance?

A long-term care policy could help you plan for and choose your future care while helping to protect what you've worked your whole life to secure. With long-term care insurance, you may be able to take control of care decisions, maintain independence and remain in your home longer. You may be able to reduce the burden on family members — and potentially safeguard your legacy, retirement savings and assets.

Long-term care insurance may help provide the personal freedom we sometimes take for granted, but that can pose a challenge as we age. It also covers supervisory needs (like the need for regular or constant supervision) that arise from cognitive impairments such as Alzheimer's disease and dementia.

This policy type provides for two main categories of care: skilled care and custodial care. Skilled care includes nursing and physical, occupational, respiratory and speech therapy. It may take place in the home, at adult day centers, assisted living facilities, Alzheimer's facilities or nursing homes. Custodial care is often performed in the home and includes help with day-to-day activities like eating, bathing, dressing, getting in and out of bed or a chair, as well as using the bathroom.

How Is It Different From Other Coverage?

Going without long-term care insurance might mean relying on government programs, burning through your retirement savings — or possibly leaving your family or children with medical and nursing home bills. Why? Many people mistakenly believe their care needs will be covered by the government or other insurance policies. However, government programs such as Medicare and Medicaid aren't designed to cover care costs over long periods of time. In addition, long-term care assistance isn't typically paid for by health or disability insurance.

With Medicare, patients receive long-term care support only if they need skilled services or rehabilitative care, according to the U.S. Department of Health and Human Services. This includes nursing homes for a maximum of 100 days and home-based care for a short period of time for those receiving skilled home-health services. According to the U.S. Department of Health and Human Services, people must pay for long-term care services that are not covered by a public or private insurance program.

Medicaid is primarily based on income, according to Medicaid.gov. Individual states first determine if someone is eligible for Medicaid, then decide whether that person qualifies for long-term care services. While thresholds vary by state, Medicaid recipients typically must spend most of their personal assets to qualify.

Many people think they can rely on employer-sponsored and private health insurance for care. However, the majority do not significantly cover long-term care needs. Most cover only the same kinds of limited services as Medicare. If long-term care is covered, it is typically only skilled, medically necessary care that lasts for a short period of time.

Potentially, without long-term care insurance, you may have to rely on personal assets and family for care. Personal income and assets are frequently used to cover care costs, according to the AARP. And often, family members must assume the burden of care. The Center for Retirement Research at Boston College reports that 17 percent of adult children take on a caregiver role at some point — at an average of 77 hours per month.

What Factors Impact Coverage?

Would a long-term care insurance policy make sense for you and your family at this stage of your life? There are many factors that influence policy cost and coverage. Age and current health play perhaps the largest roles. Gender is also important: The U.S. Department of Health and Human Services states that women require longer care (3.7 years) on average than men (2.2 years), so their policy premiums may be higher.

Your family's medical history could influence the cost and benefit length of a policy as well. This is especially true in cases where a disease is diagnosed well before someone's senior years. A family history of early-onset Alzheimer's disease, multiple sclerosis and other critical illnesses could impact policy costs. In such cases, it might make sense to look into a policy sooner.

There are also economic factors to consider. In terms of personal assets, it's important to know exactly what and how much you will need to help protect in order to better estimate the total dollar benefit you may need. Additionally, know where you intend to reside in the future, as the cost of care varies by state and region — and care costs rise due to inflation. It's worth reviewing any policy yearly to help ensure you keep pace with increasing costs.

You might be able to get a preferred rate if you buy a policy sooner. However, there's no one-size-fits-all policy — everyone's situation is unique. It's important to spend time getting a sense of what an ideal long-term care policy may look like for you.

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Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Western & Southern Financial Group and its member companies (“the Company”) does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.