Much like the insurance you purchase for your home or auto, Long-Term Care insurance protects you against risk – in this case, the risk that at some point you will need care and assistance, either in your home or in a facility.  Almost 70% of today’s 65 year-olds can expect to need Long-Term Care at some point in their lives.  The average Long-Term Care claim today lasts for a little over two years and costs about $70,000 per year.  Of course, those costs will increase over time through normal inflation and because of increased demand for services from the aging baby-boom population.

Long-Term Care insurance can help to provide the resources to pay for home health care or care in assisted living facilities or nursing homes – costs that typically aren’t covered by health insurance or Medicare. If you are in relatively good health now, Long-Term Care insurance may be right for you.

How a typical long term care insurance policy works

Coverage will differ from policy to policy, however, most Long-Term Care policies provide coverage for care in a variety of settings, including care in your home, care in assisted living facilities, care in adult day care facilities, hospice and respite care, and care provided in a nursing home.

Benefit trigger

A Long-Term Care insurance policy will have a defined “benefit trigger.” The “benefit trigger” is the event or criteria that the insurance company uses to determine when payment for Long-Term care has begun. Typically, benefits are triggered when it is determined that a person needs assistance with two of the six “Activities of Daily Living.”

• Bathing
• Dressing
• Using the toilet
• Moving to or from a bed or chair (also called transferring)
• Incontinence
• Eating

Elimination period

Long-Term Care insurance policies generally include an elimination period of 30, 60 or 90 days. This is the amount of time that must elapse after the trigger of benefits, but before the Long-Term Care insurance policy will begin paying for care. The elimination period is similar to a deductible that you may have on other types of insurance policies. However, instead of paying a fixed dollar amount, as with a deductible, you are responsible for paying all the costs of care during the elimination period.

Benefits

Once you begin receiving payments under a Long-Term Care insurance policy, most policies will pay benefits up to a specified limit. Some policies will pay for care up to a specified total dollar amount. Others will pay a certain amount per day for care for a specified period of time. You may also have the option to add inflation protection to your policy, so that the policy’s defined daily benefit will increases at a pre-determined rate, thus protecting you from the rising cost of care over time.