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Who Should Have Long-Term Insurance?

Long-term care is a type of medical insurance that covers the potentially devastating costs of long-term custodial care for individuals who lose the ability to perform at least two common ADLs, or activities of daily living. These include continence, hygiene, feeding, transferring, dressing and toileting. Some policies also cover cognitive disorders such as alzheimers, but some policies exclude this type of care.

  1. Long-Term Care Costs

    • The cost of full-time skilled nursing care varies by location. But nationwide, as of February 2011, annual costs for the care alone can exceed $70,000 to $80,000 per year --- with outliers significantly above that figure. This is enough to overwhelm a modest retirement pension and financially devastate not only the individual needing care, but also a spouse who also relies on that income to survive.

    Preserve Income

    • Long-term care insurance can help a family protect income from having to go to the nursing home facility. Unless the family has nearly unlimited resources, or is so poor as to make Medicaid a more realistic option, the family may wish to consider purchasing at least some long-term care coverage.

    Protect Assets

    • A long-term care policy can help protect assets for a spouse or to pass assets on to heirs. Some states have established long-term care partnership programs. These programs are designed to encourage citizens to purchase their own long-term care coverage by allowing them to exempt an amount of assets equal to the amount of long-term care benefits they purchase for the purposes of qualifying for Medicare. For example, if you have a home worth $400,000, and you purchase long-term care benefits worth $400,000, you can keep your home and still qualify for Medicaid when your benefits are exhausted.

    Considerations

    • Look for a policy from a financially strong company. Long-term care underwriting is notoriously difficult. Some companies have imposed sharp premium increases on policy holders in recent years. Look for companies that have limited or avoided the need for premium increases. Also, look for companies that don't exclude cognitive disorders such as alzheimer's disease from care. Policies should be "tax-qualified," meaning they qualify for state long-term care partnerships. Also, look for a policy with inflation protection built in to the policy. Inflation can have a significant effect on the level of protection you receive from your policy as the years go by.

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