What does long term care insurance cover?
This is a consumer question that we hear quite often at SeniorMag. Long-term insurance isn't all that complicated but there seems to be little written about it for the consumer.
Long-term care insurance generally pays benefits when long-term care is prescribed by a doctor for a specific condition or when it is necessary to obtain assistance in taking care of basic needs.
An example of this might be someone who has occasional dementia and may have trouble bathing, eating, and getting dressed. Obviously, physical disability is just as limiting as mental disability.
Getting proper care at home
The purpose of long-term care insurance is to make sure that you are getting proper care, not just any care. Don't count on the fact that your sister's granddaughter will get a nice paycheck out of staying with you while she goes to school, just because she helps take care of you when she is home. It doesn't happen that way.
Home health services
Home health services are typically covered as long as they are prescribed by a doctor and are performed by a licensed nurse, physical therapist, or other similarly licensed professional. In almost all cases, home healthcare workers must be licensed.
Non-medical home care
Non-medical home care (personal services) are another matter. This is a field that is changing rapidly and varies from state to state. Look for laws to change as well as the way that insurance companies look at these services. In many states, anyone who wants to can get a business license and be in the field of home care.
Check your policy to see if it covers non-medical personal assistance before you sign up. In most cases it does but there can be some criteria that has to be met. Some policies specify licensed homecare companies. If so, be sure that you pick a company that is licensed if you want these fees covered. In some states, this isn't a possibility yet because there isn't a license procedure yet.
Nursing care facilities
Most nursing homes are covered by long-term care insurance so long as they are state licensed. Again, there may be conditions in your policy so be sure to review all requirements before you pick a policy. Though most policies currently cover all state licensed nursing homes, there are usually provisions that limit the insurance company's exposure by capping the amount that they will pay.
In the future, look for long-term care insurance companies to add more stipulations to their policies including restricting which facilities are covered. Health insurance companies currently do this with doctors by negotiating certain rates and you can expect this to come up with nursing facilities as well. If that is the case, insurance companies will restrict you to care facilities with which they have contracts.
Most long-term care insurance policies pay benefits when long-term care is prescribed by a physician as necessary or medically necessary or when someone can no longer take care of basic needs.
Insurance waiting periods
Most long-term insurance policies have a minimum waiting time where they will pay benefits. In fact some policies give the insurance company the right to reject the policy for a period of time if you should become incapacitated. The reason for this is that some people will only get insurance when they know they will need it and this simply isn't the idea behind any insurance policy.
After you have satisfied the waiting period, you may receive benefits up to the limits of the policy. Check your policy to see if there is a maximum life-time payout. While that maximum may seem reasonable today, increasing prices and the fact that you may live longer than expected may use up that maximum quickly.
Many policies now offer an inflation adjustment feature that increases your per-day benefit to cover higher costs. For example, the daily benefit amount might increase each year at a compounded or simple rate of 5%.
Premiums for long-term care insurance can vary widely, depending upon your age and the level of benefits you buy. Policies that cover a substantial portion of the daily cost of a nursing home or a policy with an inflation adjustment feature will tend to be more expensive.
The older you are when you first buy a long-term care policy, the higher the premiums probably will be, because the chances of your needing long-term care increase with age. A policy purchased in your early 50s may be relatively inexpensive, compared to one purchased at age 70. In general, premiums remain fixed each year, unless they are increased for a class of policyholders at once.