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Insurance – Long-Term Care – Overview

As America’s baby boomers age, more insurance companies are offering long-term care insurance, which is designed to cover the costs of long-term care, an unfortunate reality for many members of the elderly population. In fact, depending upon the study, somewhere around 50 percent of the American population will require long-term care at some point in their lives.

Whether the purchase of long-term care insurance is a wise investment depends upon many factors, including an individual’s health and financial status. However, even aside from general predictors such as these, the need for nursing care, for instance, is a gamble. Some will need it while others will not. This article is designed to provide a brief overview of the purpose of long-term care insurance, its advantages, and its disadvantages.

What Is Long-Term Care?

Defining long-term care is complex when insurance policies are at issue. In defining long-term care, policies often mandate the conditions of care, the locations of care, and the needs of the patient. For the purpose of learning the basics of long-term care insurance, however, long-term care includes health, personal care, and social care provided on a daily basis to individuals who cannot perform these activities on their own. Health needs include medication administration, for example; personal care includes bathing and grooming; and social care includes organization of social activities.

What Are Some of the Advantages Associated with Purchasing Long-Term Care Insurance?

Although Medicaid, the country’s health care program for those with low income and assets, covers long-term care, Medicare, the country’s health care program for the elderly and disabled, does not. Only a few of the standardized Medicare supplemental policies offer a limited amount of long-term care, and that is provided under clearly defined circumstances.

For Americans who are not eligible for Medicaid, long-term care insurance may provide the comfort of knowing that some of the costs associated with long-term care will be paid, depending upon the policy at issue. Long-term care insurance may also prevent an elderly person’s assets from being depleted, may increase the probability that seniors will not become dependent upon loved ones, and may avoid making family members liable for substantial nursing home bills.

What Are Some of the Disadvantages Associated with Purchasing Long-Term Care Insurance?

The single largest disadvantage associated with purchasing long-term care insurance is a hard, cold financial fact: The majority of long-term policies purchased at or near retirement age are no longer in effect when long-term care is actually needed. Unfortunately, individuals purchasing long-term insurance often buy policies that are within their means when purchased, but the cost of rising premiums eventually makes it financially impossible to continue paying premiums as they age, resulting in cancellation. For this reason, it is particularly important to consider not only current but also future income and needs when purchasing policies.

The second disadvantage to purchasing long-term care insurance is that, assuming a policy is in effect when needed, the benefits may fail to meet the purchaser’s expectations. Policy provisions, such as exclusions and the lack of inflation protection, often render policy proceeds wholly insufficient to pay the cost of long-term care. A complete discussion of available coverage is provided in a separate article.

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