Commonly Asked Long-Term Care Insurance Questions

What does Long-Term Care Insurance Cover?
LTC Insurance pays for the following services: care in your own home, care in an Adult Day Care Facility, an apartment in an Assisted Living Facility, and care in a Nursing Home. Click here to see the average costs of care in Florida.

How do you qualify for benefits?
There are two ways to qualify. The first way is with a physical problem -- any injury or illness whether long or short term that leaves you unable to fend for yourself, like a broken bone or a stroke. The company measures your functionality and your Doctor prescribes the best method of care. The second way to qualify is called Cognitive Impairment - there may be nothing wrong with you physically, however, you have been diagnosed with dementia, senility, Alzheimer's, etc.

Wouldn't it be better to invest the money?
Let's do the math. Take a 40-year-old couple. They could buy a worthwhile long-term care plan for $1,300 for year -- that's for both of them. Now let's say that instead of that, they invest $1,300 each year for 40 years. At 10%, that comes to $633,000 -- before taxes and broker's fees. Now take the $157 per day for a nursing home and run it out for 40 years at 5.8% and we get a projected one-year cost of $546,000. So they will have saved enough money to cover one person for one year. What about the other one? What if more than a year is needed?

So why do so few people have long-term care insurance?
Good question. It's mostly a matter of consumer education, something the industry hasn't handled very well to date. There are also a couple of myths about LTC insurance that dissuade many who should have it. One is that it's "nursing home" insurance and the other is that long-term care insurance is basically something that older people should have. First of all, it's the opposite of "nursing home insurance." Long-term care insurance can help you keep your independence and stay out of nursing homes. It will pay for home health care, adult day care and other services that can enable you to live independently and with dignity. The other big myth about long-term care insurance is that it's just for old people. In fact, 40 percent of those who need long-term care are in the 18-to-64 range -- people like Christopher Reeves and Michael J. Fox. If we're lucky, we may need a few months or a few years of chronic care when we're really, really old. If we're unlucky and we're injured in an accident or we come down with a chronic disease, we may need it for a lifetime.

But what if I pay premiums on long-term care insurance and never need it?
What if you pay the premiums on your car insurance for years but never have a serious accident? Wouldn't you consider yourself lucky? Insurance is there to protect us in the event that we need it. The probability that we'll need long-term care is much greater than the probability that we'll have a serious accident. There are actually some companies offering a rider that returns all premiums at death to a beneficiary.

What's the best age for buying LTC insurance?
There's really no answer to that. Since disability can occur at any age, it's prudent to buy coverage as soon as you can afford to. Remember, the potential payback is a lot higher if you are unlucky enough to need coverage sooner rather than later.

What's an average premium?
Here are some annual per person premiums for the average benefit purchased in the U.S. in 2004: $150 daily benefit, a four year benefit period, a 30 day waiting period (deductible), 100% home health care and 5% simple inflation for life. These premiums are for married individuals in relatively good health. Is this expensive? It depends what you compare it to. I don't think it's expensive compared to paying out $60,000 a year or more per person for care, a figure that's likely to triple in 20 years.

How do we evaluate the need for long-term care coverage versus other financial needs?
Well, it depends what's important to you. Below a certain net worth level, long-term care insurance is probably not appropriate. But for those who can afford it, it can make an enormous difference in quality of life, not just for the insured person but also for his or her family. We're just starting to get some good, large-scale studies of how LTC benefits are being used in the real world. Of people who are receiving benefits for home care, half of them said they would have been in a nursing home were it not for the long-term care insurance. And the caregivers are saying they're twice as likely to keep their job because of the benefits from the LTC insurance. In other words, because the insurance is paying for home health care, the person's spouse or adult child doesn't have to quit working and stay home to take care of her or his relative. That's why I always say that long-term care insurance is about so much more than financial benefits. It gives families the money and the help they need to keep their dignity and maintain their lifestyle.