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The Recap: Why Buy LTCI?

We all hate dramatic insurance ads, especially the ones that reenact wake scenes and  pretend to listen in on kitchen sink-side chats wondering how poor old Emily is going to pay for the funeral.  And scare tactics with peppy tag lines are just as bad (you know…’failing to plan is planning to fail’ – that sort of thing), so we won’t go there, either.

What we will do, though, is re-state the obvious: we are all living longer and are very likely to need long-term care at some point.  And unless you already have LTCI, you are probably not covered for that care.  Anywhere.  Government programs are not designed to pay for our long-term care needs.  Medicare, for example, pays only for skilled care (nursing home type care), and Medicaid pays for the most needy.  Neither program is designed to promote home care.  And long-term care is almost never provided by your health insurance or your long-term disability insurance.

LTCI is also a woman’s issue.  Women live longer than men, have more chronic health problems that might lead to the need for long-term care, and are the family caregivers.  When a husband is ill and needs care, more often than not, a wife is there.  When he dies and she is left on her own, the usual pattern, who is there to provide the care?  The daughter with the full-time job two states away?  The daughter-in-law with two kids still in high school, and college to plan and pay for?  Not likely.  Many older women are on their own.  Keep in mind that more than two-thirds of Americans over 85 are women; elderly women are very vulnerable to poverty and far more likely than men to run out of resources later in life.

Long-term care does not mean nursing home care.  Most long-term care insurance policies cover people in all care settings, including the home.  And the rates are unisex (at least for now), meaning that despite the fact that women live longer and have a far greater risk of needing long-term care (that is, they will actually receive benefits from a policy), they pay the same rates as men.

Long-term care services can be very, very expensive.  Nursing homes cost an average of $40,000 per year, easily exceeding $100,000 annually in some parts of the country.  And home care is pricey, too: bringing in a home health aide (not a nurse, not a physician, just a helper) three or four days a week for a few hours can quickly add up to $1,800 per month.  Daily full-time visits can cost $7,200 per month or more.  Many are sent to nursing homes to save their providers money – not a pleasant thought.

Okay, then.  You will need long-term care at some point.  You can pay for it in several ways: cash, private long-term care insurance, perhaps Medicare, perhaps Medicaid.  You are making an assessment of your needs for LTCI by thinking over the following:

  • You want to stay away from Medicaid in order to receive quality care and have some control over your health care arrangements.
  • You want to protect your loved ones from financial hardship and caregiving burdens.
  • You have assets to protect.
You will need to give careful thought to whether or not you have the ability to pay your LTCI premiums, even if they increase in the future.  The premium may increase, not due to your age or health, but because the insurance company might need to adjust their rates due to a higher than anticipated percentage of claims.  And benefits are commonly structured as reimbursement or indemnity:
  • Reimbursement: This method pays for your care costs up to the amount of your daily or monthly benefit.  There is likely policy language that restricts your care to state licensed facilities or licensed home health care agencies.  There are often other restrictions and because of these constraints, reimbursement policies are usually less expensive.
  • Indemnity: This method pays out the maximum benefit up front and you spend it as you please.  If you want friends or family to be paid for taking care of you, this is your approach.  Indemnity policies are more expensive. 
One more thing.  Every long-term care insurance policy will have exclusions.  Again, insurance is a state-regulated industry and some states forbid certain exclusions that others allow, and federal policies have fewer exclusions than others.  While there are changes in insurance plan design every year, many LTCI policies exclude the following:
  • Attempted suicide or self-inflicted injury.
  • Mental and nervous disorders/diseases (except organic brain disorders, such as Alzheimer’s).
  • Alcoholism and/or drug addiction.
  • Care occasioned by an ‘Act of War’.
  • Treatment paid for by government agencies, such as the VA or Medicare.
That should pretty much do it.  Here is a link to an introduction to LTCI you might click on: AALTCI.  You could also go online for other resources – and talk it over with an insurance agent you like, asking for his or her suggestions or a referral.  And, of course, if friends or family have plans they like, check them out!  


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