What Does Long-Term Care Insurance Mean?

Long-term care insurance is a type of health insurance product that is designed to help with the costs associated with long-term care. Many elderly people have to go into long-term care at some point, and this type of insurance is designed to help subsidize some of the costs.

Function

• The purpose of this insurance is to hedge against the risks of having to pay for long-term care out of pocket. According to AHIP, "about 19 percent of Americans aged 65 and older experience some degree of chronic physical impairment." The costs of this type of care can be very high and long-term care insurance pays part of the bill.

Significance

• This type of insurance coverage is important to consider because most of the things that it covers are not covered by traditional health insurance. With a regular health insurance plan, you typically do not get any long-term care benefits from it. If you will depend on Medicare for your medical coverage in the future, you will also not have any long-term care benefits. The cost of staying in a nursing home can be more than $50,000 per year, which makes the need for this insurance great.

Types

• Even though the basic idea of all long-term care insurance is the same, there are different types of coverage that you can buy. Some policies provide you with a daily benefit for every day that you are in a long-term care facility. Others have a maximum lifetime benefit to the policy and pay all of your costs until that threshold is reached. Some policies cover long-term care at home, while others only cover care in long-term care facilities.

Premiums

• In order to get this type of coverage, you have to pay premiums to an insurance company. The amount that you pay depends greatly on how old you are when you take out the insurance policy. If you are younger than 40, you get the lowest rates available. If you wait until you are 65 or 70 to buy the coverage, you have to pay considerably more. For example, according to the U.S. Department for Health and Human Services, "someone younger than 40 could expect to pay about $881 per year in premiums while a 70 year old would pay $3026."

Considerations

• The decision whether to purchase long-term care insurance is a difficult one for many people. If you feel like there is a chance that you will become incapacitated at some point in the future, you may not like the idea of relying on your family members to take care of you. You should look at your family history to help gauge your need for long-term care insurance. If you are going to buy this type of insurance, you should act as soon as possible so that you can save money on premiums.