If you need in-home care or to live in an assisted living or nursing facility for an extended period, long-term care insurance can provide peace of mind. However, long-term care insurance can be too expensive or the benefits too limited to justify the cost. The National Association of Insurance Commissioners (NAIC) has these tips to help you better understand this complicated insurance product.
What is long-term care insurance?
Long–term care insurance provides in-home or in-facility care for people with chronic illnesses, disabilities or other conditions requiring ongoing care over an extended period. The range of care can be great – from helping bathe, dress and eat to skilled care provided by nurses or therapists. Someone with a prolonged physical illness, a disability or a cognitive impairment such as Alzheimer's disease often benefits from long-term care.
But I already have health insurance
Traditional health insurance policies do not pay for this type of daily or extended care. Medicare may pay for a limited stay in a nursing home, but only under specific circumstances. Medicaid may cover qualified individuals.
Long-term care insurance can be costly
The cost of long-term care services depends on the amount and type of care you need and where you get it. This type of care can be expensive, so do your research. Investigate costs in your region for care in a nursing home, an assisted living facility and your own home. Consider these figures as you look at policy premiums.
Once you have an idea of the cost of care near you, contact several companies and agents for quotes. Be sure to compare benefits, the types of facilities covered, limits on your coverage and the premium cost. Ask about potential rate increases and the rate increase history for the company. Only buy insurance from a reputable agent or company licensed to sell insurance in your state.
You may have a choice between a federally "tax-qualified" long-term care insurance policy and one that is not. A tax-qualified policy may allow you to deduct part or all of the premium you pay from your federal taxes. Consult your tax professional to determine if a specific policy offers tax advantages.
A growing number of life insurance policies and annuity contracts now either include a built-in long-term care benefit or offer an add-on to your policy that pays for long-term care expenses. Check with your financial planner to see if this type of policy makes sense as part of your financial plan.
Deciding whether to buy
Whether you should buy a long-term care insurance policy will depend on your age, health status, overall retirement goals, income and assets. Premiums are expensive. If you are on a fixed income, you should think carefully before purchasing such an expensive product. On the other hand, if you have means to pay premiums and assets you wish to protect, a long-term care insurance policy may be for you.
For more in-depth information, the NAIC's Insure U consumer resource has more information, including a detailed long-term care shopping guide. If you have specific questions about a company or policy, contact your state insurance department by visiting www.naic.org. Click on "Map" in the header to find your state.