THE BASICS OF LONG-TERM CARE INSURANCE

An increasing number of Americans are facing the daunting prospect of trying to finance the costs of post-retirement medical care. Many of us, having watched our aging parents face the same crisis, know that the best time to plan is now—when there is still time.

Unfortunately, there are many common misconceptions that cause people to put off or minimize the need to plan for the eventuality of long-term custodial or nursing home care. For example, many people assume that Medicare will cover these costs of long-term custodial or nursing home care. Others believe that Medicaid, the federally- and state-funded program that provides the aged or disabled poor help with medical expenses, will pay for needed long-term care. The truth is that Medicare only pays for this kind of care in very limited circumstances, and Medicaid provides coverage only to those who fall below specified asset levels.

The Basics of Long-Term Care Insurance
Long-term care (LTC) insurance covers the kind of assistance you might need if you ever have a chronic illness or disability that makes it impossible for you to care for yourself over a long period of time. LTC policies are generally indemnity policies, meaning that they pay a set amount—usually a fixed dollar amount per day—for nursing home confinement or qualifying home health care.

Many long-term care insurance policies limit coverage to skilled, intermediate and custodial care by state licensed personnel. Generally, skilled care refers to round-the-clock treatment by nurses under a doctor's supervision. Intermediate care involves occasional nursing and rehabilitative care under the supervision of a doctor, while custodial care entails activities such as bathing or eating that provided by someone without professional medical training.

Pricing
The cost of a long-term care policy can vary significantly. While each policy is priced differently, most depend to some extent on the following factors:

Age. The younger you are when you buy a policy, the lower the premium will be.

Elimination or deductible periods. These are the number of days you must be in a care facility or the number of home care visits you must receive before your policy's benefits begin. Usually, the longer the elimination or deductible period, the lower the premium.

Indemnity value and duration of benefits. The cost of the policy will increase in direct correlation to the amount of the daily payments you wish to receive under the policy and the length of time you want them to continue.

Limits
All policies contain limitations and exclusions, which vary from company to company. For example:
Age Limits. In many cases, you will not be able to buy a long-term care policy after you reach a certain age.

Existing Conditions. An insurance company generally requires that the policy be in force for a specified period of time before it will pay for care related to a health problem you already had when you became eligible for coverage.

Non-Covered Conditions. In addition, a policy may not pay for long-term care related to inorganic mental or nervous conditions, alcoholism, mental retardation or other health conditions.

If you're thinking of purchasing long-term care insurance, be sure to read all the information on a policy carefully before making any decisions. If there is anything you're unsure of, ask.