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Long-term care is the assistance provided when a person is unable to provide for himself or herself as the result of disability or a prolonged illness.  It ranges from providing personal care at home, such as bathing and dressing, to skilled nursing services in a nursing home.  Long-term care is offered through home care agencies, senior centers, adult day care centers, traditional nursing homes, and retirement communities that provide ongoing care.

Who Should
Buy It?

Do you need long term care insurance?

A long-term care insurance policy is not for everyone, but does make sense as an affordable and worthwhile form of insurance for some.  It depends on your age, health status, overall retirement objectives, income and wealth, and should not cause financial hardship or force you to forego other financial needs.   Whether long-term care insurance is appropriate really requires a full financial analysis.  These policies are only for people with significant assets they want to preserve for family members, to assure independence and not burden families members with nursing home bills.  Never buy a policy if:

  • Paying the premiums will be a burden.
  • If the only source of income is a minimum Social Security benefit or Supplemental Security Income (SSI).
  • If paying utilities, food or medicine stretches a budget.
  • If you have Alzheimer's or Parkinson's disease. No company will want to sell you a policy since they will face losses.

Although the need for long-term care can arise gradually as a person ages and needs more and more assistance with activities of daily living, for most a stroke or a heart attack will be the precipitating need. Those with acute illnesses may need nursing-home care for a matter of months, while others may need care for years.

Common exclusions
Do not expect any carrier to pay benefits for:

  • Mental disease and nervous disorders, except some do cover Alzheimer's
  • Addictions to drugs and alcohol
  • Injuries and illnesses caused by war
  • Treatment paid by the government
  • Injuries that are self-inflicted, such as in suicide attempts

Odds of Needing
Long-Term Care

Studies have shown that 43% of those who turned age 65 in 1990 will enter a nursing home at some time during their life.  Of those who live to age 65, nearly 1 in 3 will spend three months or more in a nursing home and 1 in 4 will spend one year or more in a nursing home. Only 1 in 11 will spend five years or more in a nursing home.

Women outnumber men in nursing homes according to studies. Thirteen percent of women as compared to 4% of men, were projected to spend five or more years in a nursing home. And obviously the risk of needing nursing home care increases with age.

After assessing the odds, consumers must stringently analyze the reasons for a policy and the ability to pay for it for the balance of a person's life.  It makes no sense to buy a policy unless it can be paid every year until death.  Far too many policies are cancelled by policyholders on fixed incomes as they grow older and their premiums increase accordingly. 

Understanding the Product

How to compare long-term care insurance policies

Buying tips

Shopping checklist

Tax considerations

Here are the most commonly used types of policies and their generally accepted meaning.   Carriers can of course give special meaning to certain terms under their contracts, so it is important to always read the fine print. '

Skilled nursing care is needed for medical conditions that require care by specially trained, and usually state-licensed nurses or therapists.  It is given either during or just after the severest level of an illness, and is usually required around the clock, 24 hours a day.  Skilled care can be provided in a person's home with help from practical, as opposed to registered, nurses.

Intermediate nursing care is associated with stable conditions that require daily supervision, but not around the clock care.  It is less specialized than skilled nursing care, often involves much personal care, and is supervised by registered nurses.  Intermediate care is often needed for many months or years.

Custodial care is intended to assist with daily living, which includes bathing, eating, dressing, and other routine activities.  Special training or medical skills are not required.  It is provided by unskilled nursing assistants in nursing homes, day care centers, and at home.  It is often called personal care.

The Cost of Long-term Care

Long-term care is expensive, depending on the severity of a disability, the degree of care needed and where it is to be provided. In 1991, the cost of a year in a nursing home averaged $30,000 across the United States. Skilled nursing care at home with two hour visits by a nurse three times a week over a year might cost about $12,500.  Personal care at home from an aide three times a week for two hours would cost about $8,400 a year.

In major cities, the cost can be expected to reach $60,000 a year and as much as $100,000. With an average nursing home stay of 19 months, seniors living in major metropolitan areas, can expect to pay $100,000 on long-term care in addition to medical bills and prescriptions.

Who Pays for Long-term Care?

Combine Medicare, Medigap and long-term care insurance for best coverage

The answer is simple: it comes from your cash and your assets, your family's assets.   For those without assets, it is paid by Medicaid programs administered by state government.  More than half of nursing home bills are paid out-of-pocket by individuals and their families, and somewhat less than half are paid by state Medicaid programs.   

Group insurance does not pay for most long-term care expenses, and Medicare does not offer long-term care as a benefit.  Only in certain cases will Medicare cover the cost of some skilled nursing care in approved nursing homes or in your home, but there is no coverage for custodial or intermediate care or prolonged home health care.

Beware of the Hard Sell

Buying tips

Seniors fear losing physical independence and becoming financially dependent.  They buy long-term care insurance coverage to avoid becoming a burden to family or friends.  The fear of nursing homes makes them especially vulnerable to high pressure sales tactics  focusing upon the risk of losing assets and reassuring promises of protection.

Loneliness clearly magnifies seniors' concerns and their vulnerabilities as consumers. One-third of those who are older than 65 live alone, and the ratio of women to men is two to one. When people are isolated, their beliefs are readily influenced by those who fill the loneliness of their lives.

The most common slimy sales tactic is known as "turning, turn to earn, or churning, " in which sales agents return once a year to pitch a "new and improved" insurance policy.  By convincing a buyer to cancel a good policy a sales agent subjects a customer to higher premiums and new waiting periods for the sake of earning a new commission.

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