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How long-term care insurance works

On Behalf of | Nov 27, 2023 | Elder Law

At some point in your future, you might need coverage for certain care needs. However, regular health insurance does not pay for services and support for daily living activities, such as dressing, eating or bathing. Also, Medicare only covers limited nursing home or in-home health care related to rehabilitation.

So how do you pay for long-term care if you need it? One option is long-term care insurance.

The need for long-term coverage

People typically buy long-term care insurance in their 50s or 60s to help pay for care expenses later in life. According to the Administration for Community Living, nearly 70% of 65-year-olds will eventually require some type of long-term care support. In addition, the median annual cost for a semi-private nursing home room is almost $95,000. Long-term care costs can quickly drain retirement savings if you pay out-of-pocket.

Fortunately, long-term care insurance provides money to cover care costs. Policies usually reimburse expenses incurred at home, in assisted living or in a nursing facility. When you can no longer safely perform several activities of daily living, you become eligible for benefits.

Application for long-term coverage

To acquire a long-term care policy, you must fill out an application and answer health questions. Insurers may request medical records from you or an interview. After you receive approval, you will pay ongoing premiums and choose coverage limits for daily or lifetime benefits. Couples can buy “shared care” policies and draw from a joint pool if one spouse exhausts their benefits.

The use of long-term care insurance

When you eventually need care, the insurance company will verify that you qualify for benefits before approving your plan. Most policies have an elimination period where you pay for services yourself before reimbursements start. After that, the insurer pays up to your policy limits as you receive qualifying care.

The decision to purchase long-term care insurance depends on your finances and personal situation. Key reasons to consider it include protecting your assets and expanding future care choices if you should require extended assistance.