Long-term Care Insurance

Q: What is long-term care insurance?

A long-term care insurance policy pays you a daily benefit to cover the cost of long term care. Long term care is ongoing care for people with chronic disabilities. It includes custodial care -- assistance with activities of daily life like eating, bathing and getting dressed -- in a nursing home, an assisted living facility or in the patient's own home.

Q: Do you need it?

This type of care isn't covered by regular medical insurance policies or by Medicare, and it can be enormously expensive. The average cost of a year in a nursing home today is $40,000; in some parts of the country, it runs to more than $80,000. Government studies indicate that 40% of Americans over age 65 will eventually need some type of long term care. Long-term care insurance is essential if you are concerned about protecting your assets and maintaining your financial independence throughout your life.

Q: What to look for in long-term care insurance?

Good Benefit Triggers

Benefit triggers are what cause benefits to start being paid. Your policy benefits should be triggered if you need assistance to perform at least two of the activities of daily living (ADLs), which include bathing, dressing, eating, toileting, continence, transferring (moving from a bed to a chair) and taking medication. Another trigger should be "cognitive impairment," which means coverage applies if you are mentally impaired (with Alzheimer's disease for example) even if you're physically able to take care of yourself.

Home Health Care Coverage

You will want to make sure your policy pays benefits for care at home as well as in an institution such as an assisted living care facility or a nursing home.

Guaranteed Renewable

This feature ensures that you will be able to continue your coverage without undergoing additional medical exams

Inflation Riders

An inflation rider will increase the benefit amount by either a simple or compound inflation rate each year the policy is in effect. This can be a costly feature, but it is protection against the rising cost of long term care. It provides that the policy is much more likely to pay an adequate benefit in the future.

Q: How much coverage do you need?

Policy daily benefits can provide up to $300 a day. How much you need depends on what costs are in your area for assisted living facilities, nursing home and home health care as well as how much you could pay for from other resources, like savings and investments.