Long Term Care Insurance

Long-Term Care Insurance

Elderly woman in wheelchair with nurseWhat is long-term care?

How much does long-term care cost?

Who pays for long-term care?

Should you buy long-term care insurance?

What kind of policies can you buy?

How policies work:

  1. What's covered?
    • If you buy a long-term care policy, you'll want to make sure you have coverage for a variety of services. Some policies cover only stays in nursing homes. Others cover only care in your home. Still others cover both nursing home and home care. In addition, some policies also cover services provided in adult day care centers or other community facilities.
  2. Where is service covered?
    • With a long-term care policy, it is not enough to know what services are covered. You also need to know where services are covered. If you are not in the right type of facility, the insurance company can refuse to pay.
  3. What's not covered?
    • Generally insurance companies do not pay benefits if services are needed for:
      1. mental and nervous disorders or disease, other than Alzheimer’s,
      2. alcoholism and drug addition,
      3. illnesses caused by an act of war,
      4. treatment already paid for by government,
      5. attempted suicide or intentionally self-inflicted injuries.
    • Note: Insurance carriers cannot exclude coverage for Alzheimer’s disease in states that have adopted the National Association of Insurance Commissioners’ long-term care insurance model law.
  4. How much coverage will you have?
    • Insurance companies offer policyholders a choice of daily benefits, usually $100 to $1,000 a day for care in nursing homes. It is important that you know how much nursing facilities in your area charge before you select a benefit amount for your policy.
  5. When do benefits begin?
    • With most policies, your benefits won’t begin the first day you enter a nursing home or begin using home care. The policies come with an elimination period (sometimes called a deductible or a waiting period). That means benefits begin 20, 30, 60, 90, or even 120 days after you go to a nursing home.
  6. What happens when nursing home costs rise?
    • Inflation protection can be one of the most important additions you can make to a long-term care policy, but protection you may hesitate to purchase since it adds to a policy’s cost.
  7. What are some of the optional provisions of long-term care policies?
    1. Waiver of premium: This provision allows you to stop paying premiums once you are receiving care at and the insurance company has started to pay benefits.
    2. Nonforfeiture benefits: These return to policy holders some of the premium that has been paid into the policy if coverage is dropped. Without this benefit, a loss could be substantial if a policy is dropped say 10 or 20 years later without ever using any of the policy’s coverage.
    3. Death benefits: These refund to your estate any premiums you paid minus any benefits the company paid on your behalf. To receive these benefits, you must have paid premiums for a certain number of years.
  8. Eligibility for benefits once you own a policy:
    • All policies have “gatekeepers” — restrictions that determine whether you are eligible for benefits. Just because you have a policy doesn't mean that you will actually receive benefits. In your policy, you'll find these discussed in a section called “eligibility for benefits”, or “benefit conditions”. Gatekeepers are an important feature of a long-term care policy and one you should pay careful attention to as you shop.

    Note: Gatekeepers that a company uses for home care coverage may be different from those it uses for nursing home care.

Are you eligible to buy a policy?

Can you renew your coverage?

What do policies cost?

Note: Beware of the word “level”. Some agents might tell you that your premium is “level” and imply that it will never rise. The National Association of Insurance Commissioners has written a model law that now prohibits insurance companies from using the word “level” in connection with a sale of guaranteed renewable policies. New rules require companies to tell prospective customers that the premiums on their policies may go up. Look for that warning when you shop.

All of the information presented here has been taken directly from the NAIC document noted above. Kensington Financial is in no way responsible for this information or any action or lack thereof which you may take based on this Fact Sheet.
Before purchasing ANY insurance policy you must consult with a qualified financial professional and ensure that you have a complete understanding of all options, coverages, and riders you may be purchasing.
Taxes/Legal - This material should not be considered tax advice or legal advice. You should consult your Tax and Legal Counsel for advice and information concerning your particular situation. You should consult your Qualified Investment Advisor at Kensington Financial Services, before making any investment or insurance decisions.
Sources - All information presented in this publication has been gathered from sources which we believe to be reliable. However, no guarantee is given or should be implied as to the accuracy of the facts and figures presented herein.

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