Keys to Long-Term Care Coverage

Vanessa Carter-Witt, CFP®

Wealth Advisor

While initial long-term care insurance costs may seem high, it can help protect you, your family and your financial legacy from debt related to your future care. If you decide it’s worth considering, here are a few of the key policy provisions.

Your daily or monthly benefit. This outlines how much the insurance company will pay based on your policy. But what’s the right amount of coverage? A private room in a nursing facility can cost over $100,000 per year, while assisted living comes in at $50,000 annually. One rule of thumb: If a policy pays less than $50,000 per year, you may want to bump up your coverage.

The benefit period. This is the amount of time a long-term care policy will provide coverage. A typical stay in a nursing home is about three years for a man and four years for a woman. Therefore, you will want to have a benefit period that is at least that long.

Payout option. Long-term care benefits can be paid in a few different ways. One payout option is indemnity. In this case, the insurance company pays you an agreed-upon daily or monthly benefit—regardless of your actual long-term care expenses. (You might even receive more from the policy than the actual cost of care.) The second payout option is reimbursement, where you provide receipts to the insurance company and they reimburse you for expenses incurred. Keep in mind that the indemnity option is usually much more expensive.

The elimination period. This determines how long you must wait for policy benefits to begin. Waiting too long may mean you pay much more out-of-pocket before policy benefits k ick in, so try to keep the elimination period to 90 days or less.

Inflation rider. Private nursing home costs have risen about 66% over the last 18 years and costs of assisted living facilities are up 88% over the same period. If you purchase a policy when you are young (say, in your early 60s), make sure your benefits include inflation protection.

There are a host of nuances to long-term care coverage. We’re here to help you figure out what’s right for your family’s specific situation. Call us today!