Straight Talk About Long Term Care Insurance

In simplest terms, long term care insurance picks up the bills for services rendered in connection with daily living assistance. Does it make sense to buy this type of policy? When should a consumer do so? Your questions - answered!

Understanding the Need for Long Term Care Insurance

The Insurance Information Institute (III) quotes the U.S. Department of Health and Human Services, when it explains that "70 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime." As baby boomers are aging, this number will likely go up. Over the next two decades, this trend translates into the possibility of finding approximately 71 million seniors in need of some type of long term care. In stark contrast - as of 2010 -- only about five million consumers had invested in long term care insurance policies.

What it covers

Activities of daily living - dressing, toileting, eating, and more - are just some examples of tasks that become increasingly difficult when aging. While not all seniors are going to require assistance there, a lot may need help with one or more activities. Finding this help may cause the senior to look to family members or friends. When these are unavailable, a senior may enlist the help of a custodial caregiver. Medicare and health insurance companies do not usually cover these professionals; instead, they cover skilled caregivers, who offer nursing care.

Not for the Poor or the Rich but the Regulars

In a bit of candor, the III explains that seniors who expect to be sufficiently poor to qualify for Medicaid can think twice about buying long term care insurance. Medicaid actually foots the bill for custodial care, even though Medicare and private insurers (usually) do not.

Nevertheless, there are exceptions to this rule: Consumers living in New York, Indiana, California or Connecticut may derive greater benefits from investing in a policy - even if they were to qualify for Medicaid. By the way, remember also that you are gambling on your state's solvency when trusting that a custodial care program will be funded when you need it; sometimes this gamble does not pay off.

The very wealthy - with a net worth above $1.5 million -- should discuss their long term care needs with a financial planner. It is possible to reap more benefits by paying these bills 'out of pocket' and then receiving tax breaks and other reimbursements.

When to buy

A young consumer - under the age of 50 - has the best chance of being accepted for a long term care insurance policy. Keep it up until you need it, and your custodial services will be paid for. In contrast, the III warns that a consumer over the age of 70 has a four-in-10 chance of being rejected.

About Long Term Care Insurance Rates

Like any other insurance product, shopping around is a must when investing in these policies. Long term care insurance rates can go up over time as well. While there is no guarantee that an insurer will not raise the rates after you sign on, consider that the Long Term Care Source reports that at least six companies have not raised their rates in eight years. Enlist the aid of an insurance broker or financial planner to find the best possible company doing business in your state.

Sources

Insurance Information Institute: "Long-Term Care Insurance"

Insurance Information Institute: "Should I buy long-term care insurance?"

Insurance Information Institute: "What's the best age to buy long-term care insurance?"

Long Term Care Source: "Long Term Care Insurance Rates"