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 LONG TERM CARE
INSURANCE
What is long term care?
Long term care can mean many different things but any chronic or disabling condition which requires nursing care or constant supervision can bring on the need for long term care services. Long term care means not only care in a nursing home, it can also mean nursing care in your own home and help with the activities of daily living, such as dressing, eating, bathing and taking medicine.
The insurance alternative
Why burden family and friends to care for you when you can preserve your independence and have the freedom to choose where to live? Long term care insurance gives you many options and can protect your assets.
We are providing some very basic information about long term care
insurance. If you want a free copy of "A Shopper's Guide to Long Term
Care Insurance" please call us at 800-350-8005, extension 8186.
The Need For Insurance Coverage
Factors To Consider Before Purchasing Insurance
Comparing Insurance Policies
Optional Long Term Care Benefits
The Need For Insurance Coverage
Long term care is very expensive, and most people cannot afford to
privately pay for long term care services for very long. The New York
State Insurance Department reports that nursing home care in 2004
averaged approximately $238 per day and $316 per day downstate or
between $86,000 and $115,000 per year. It is estimated that
persons in nursing homes stay for 2 1/2 years on average.
Home health care is also expensive. The
average cost of home health care in New York State in 2004 was $20 per hour
upstate and $15 per hour downstate. Assuming 20 hours of care per
week, this represents average home health care costs throughout the State
15,000 to $21,000 per year.
The chance of needing some type of long term care services is fairly high.
It is estimated that over 40% of all persons who were 65 years old in 1990 will
enter a nursing home during their lifetimes.
Medicare does NOT pay for most long term care services. Individuals
should not rely on Medicare to meet their long term care service needs.
Medicare does not pay for custodial care when that is the only kind of care
needed. Even skilled nursing facility care is covered by Medicare only on a very
limited basis.
Can you afford not to have this valuable insurance coverage?
Factors To Consider Before Purchasing Insurance
Are you eligible for Medicaid?
How much can you afford to pay out-of-pocket for long term care
expenses?
How much can you afford to pay for an insurance policy covering long
term care services?
If you are planning to retire, will your reduced income be adequate to meet
the annual costs of the premium?
All long term care policies are medically underwritten, so if you intend to
purchase a policy, don't wait until you have a medical condition which
could make long term care coverage more expensive or unavailable to
you.
In most cases, the premium for a policy will be lower when purchased at a
younger age. Also, insurance policies covering long term care services
are only offered at certain ages.
What types of long term care services would best meet your own personal
needs and preferences?
What are the costs of these services in the locality where you would be
receiving them?
Comparing Insurance Policies
All policies covering long term care services place certain limits on benefits and may exclude certain benefits completely. In choosing a policy that will best meet your own personal needs, it is important to understand the limitations and exclusions which are contained in these policies. The most common exclusions and benefit limits which are used in insurance policies covering long term care services are defined below:
Maximum Policy Benefit
The maximum policy benefit is the period of time or dollar amount limit for which long term care benefits will be paid under the policy. Insurance policies covering long term care services contain maximums of from one to seven years, or a dollar amount limit
which is calculated by multiplying the number of years of benefits chosen,
times 365 days, times the daily benefit amount chosen. Once the benefit limit or time limit is reached under these policies, no other benefits will be paid. Some insurance policies covering long term care services also offer a lifetime benefit option. It is important to note that in some long term care policies the maximum policy benefit is not the same for all benefits
listed in the policy.
Certain policies also contain a separate benefit limit for each particular period of care (generally successive days of care in a nursing home or while under home care without a break in the care for a period of time specified in the policy).
Deductible or Waiting Period
The deductible or waiting period is the number of days you must be in a nursing facility or the number of days of home health care you must receive before long term care benefits will be paid under the policy. During the deductible or waiting period you will
have to privately pay for the care you receive. A new deductible or waiting period may be imposed for each period of care. Shorter deductibles or waiting periods tend to increase the cost of coverage.
Pre-existing Condition Limitation
A preexisting condition means a condition for which medical advice was given or treatment was recommended by, or received from, a licensed health care provider within
6 months before the effective date of coverage of the insured person. Some of the policies covering long term care services contain a preexisting condition limitation. This limitation is the period of time after you buy the policy that benefits will NOT be payable for care related to the preexisting condition. Policies covering long term care services
may not contain a preexisting condition limitation of more than six months after the effective date of coverage.
Policy Exclusions
Specific exclusions are listed in all long term care policies. Some of the more common exclusions in policies covering long term care services are:
Mental illness, however, the policy may NOT exclude or limit
benefits for Alzheimer's Disease, senile dementia, or demonstrable
organic brain disease.
Intentionally self-inflicted injuries
Alcoholism and drug addiction
Care in government nursing facilities unless a charge is made
which you are obligated to pay
Coverage while the insured is outside the United States and its
possessions
Daily Benefit Amount
Most of the policies covering long term care services currently being sold do not cover the full charge for a nursing facility or home health agency. Each indemnity policy
limits payment to a daily benefit amount, which is the dollar amount payable per day based on the type of care being provided. Any charges above the daily benefit amount must be paid by you. Most indemnity policies cover provider charges up to the daily benefit
amount.
Optional Long Term Care Benefits
The New York State Insurance Department now requires that at the time of sale of policies covering long term care services, certain optional benefits must be offered. These options and the type of policies they must be offered with follow:
An Inflation Protection Benefit must be offered with "Long Term Care Insurance", "Nursing Home Insurance Only", "Home Care Insurance Only" and "Nursing Home and Home Care Insurance". It is important to realize that a daily benefit amount which is
adequate today to meet nursing home and home care costs may not be adequate ten years from now. In an indemnity policy an Inflation Protection Benefit increases the daily
benefit amount over time to help keep pace with inflation and increased expenses.
A Non-forfeiture Benefit must be offered with "Long Term Care Insurance" policies. The
Non-forfeiture Benefit is designed to ensure that if you lapse your policy (i.e., stop paying premiums) after a specified number of years, you retain some benefits from the policy. There are currently two common types of
non-forfeiture benefits being offered with certain insurance policies covering long term care services. These are referred to as a "Reduced Paid-Up Benefit" and a "Shortened Benefit Period". A brief description of these benefits follow:
Reduced Paid-Up Benefit If you purchase a reduced paid-up benefit, it will provide that if you lapse your policy after a specified number of years, the policy will continue
with reduced daily benefit amounts (some insurers apply this
non-forfeiture benefit only to nursing home benefits).
Shortened Benefit Period If you purchase a shortened benefit period, it will provide that if you lapse your policy after a specified number of years, the policy will continue to cover the same benefits (amounts and frequency in effect at the time of lapse) that would
have been covered under your policy until the non-forfeiture benefit amount is exhausted. A similar
non-forfeiture benefit that was offered in the past was known as an "Extended Term Benefit". In other words, the "Reduced Paid-Up Benefit" provides reduced
benefits for the original term of the policy, and the "Shortened Benefit Period" provides full benefits for a reduced period of time.
Note: all of the optional benefits noted above increase the cost of the basic policy.
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