What Is Long-Term Care Insurance?

Proper retirement planning involves making sure you have ample insurance coverage against major financial impacts to your life. While many people know about the need for medical insurance and retirement planning, long-term care insurance is another essential that should be part of every retirement plan. To protect our family, my wife and I made sure we had long-term care insurance to cover serious, extended illness or just needing nursing home care, so we would not go through our savings and investments.

Whether you are planning for retirement or recently retired, long-term care insurance is a key part of your financial security. The numbers are frightening. According to US government statistics, a year in a nursing home can average $50,000; here in Los Angeles it's closer to $100,000. To have a home health aide come to your home a few hours a day, a few days a week can easily cost $1,000 a month and assisted living facilities cost at least $2,000 a month on average; closer to $4000 a month here in Los Angeles.

None of these costs are covered by your health insurance or even Medicare. Your health insurance covers some costs if you get sick or injured, and may cover some nursing home care after a surgery or injury, but those benefits will quickly run out and are not designed for long-term care.

The key to remember is that long-term care insurance will not cover pre-existing conditions, so you must purchase this insurance in advance, before you get sick or find yourself at a state of age where you need to be in a nursing home. Medicare and Medicaid do not cover long-term care, so we knew we could not rely on the government to support us. Medicaid covers almost half of all nursing home costs, but you must be below the poverty level to qualify, which usually means you have gone through all your money. The law used to require your spouse to also be broke and without assets, but the law has changed to allow a spouse, remaining at home, to retain a certain level of assets, while the spouse can qualify for Medicaid. But these Medicaid benefits cover the bare minimums for the most basic facility and leave you no choice.

Long-term care insurance is offered by many providers. Check with your employer for a group policy offered, also trade groups and professional organization may also offer coverage. Individual policies are also available from all major insurance providers and the Blue Cross system as well.

No policy will cover all long-term care expenses fully, most long-term care policies are for a specific defined benefit per day for a specific term, or when the benefits are exhausted. So a policy may be for $200 a day for four years, or about $300,000. If the costs were higher, the coverage would last for a shorter period of time and vice-versa, the overall benefit will normally remain the same. In most cases the younger you are when you get the policy, the lower the premiums will remain, as they normally do not rise with age.

Check your life insurance policy as some do offer long-term care benefits. In this case, some of the life insurance benefit money that would be paid to your beneficiaries, will be paid out to pay for your care while you are needing long-term care.

So as part of your retirement financial planning, be sure to include long-term care insurance to protect your lifestyle, your assets and your family.

Source:
US Federal Citizen Information Center "Guide To Long-Term Care Insurance" from pueblo.gsa.gov

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