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Life Insurance: Providing for Long-Term Care

by Amy Lillard

(5/22/2012) Life insurance provides for your loved ones and other beneficiaries in the case of death, offering financial support for final expenses and loss of income. But just as important for many people is providing for family and others before death, when long-term care is necessary.

In cases of disability, terminal illness, or other situations requiring extended care, bills can add up quickly. Nursing homes, assisted-living centers and home care require substantial fees, and there is often no telling how long these fees will be needed. The statistics tell the dire need: the national average cost for a nursing home stay per year is over $55,000, and they're rising at the rate of 5% per year. Plus, the national average for home health care is over $28,000.

Unfortunately, these expenses are not covered by health or disability coverage, or by Medicare. That's where long-term care insurance comes in, providing for the costs of this care, along with additional money to substitute for lost income.

Long-term care insurance is sold in daily increments. You can buy policies that pay $100, $150, or $200 per day for a specified number of years or for a lifetime. To keep policies affordable, many insured consider a reduced benefit ($100 per day for 3-5 years, for example) that still provides excellent coverage and funds that would otherwise not be available.

When considering long-term care insurance, you should know a few key terms:

• Facility daily benefit is the cost per day the policy will cover.
• Facility benefit period is the length of time over which a policy will pay out funds. When considering this, know that the average stay in a long-term care facility is around 2 years, and most use care for shorter time periods.
• Home care daily benefit is the amount of the policy benefit that can be applied to care in your home. Many people prefer to have this type of longer care available in the home over an outside facility - that means considering a policy that offers 100% of the benefit to be applied there.
• Inflation protection details how the inflation of health care costs will be taken into account in your benefit amount. Since health care costs are notoriously prone to inflation, rising higher than the normal inflation rate, this should be a prime consideration.
• Facility elimination period is the time period that the policy will not pay, usually the first 90 days of the policy.
• Marital discount provides a discount for couples who purchase this protection together.

Overall, long-term care insurance helps alleviate the fears many of us have about needing extended care. It helps policyholders prevent being a burden to the family, while providing access to quality care. It helps the insured protect their assets, and retain control over their lives and choices. It's a great investment for peace of mind. With a little knowledge and buying tips, you can find an option right for you.

For additional reading:

The American Association for Long-Term Care Insurance

Long Term Care INsurance National Advisory Center

The Federal Long-Term Care Insurance Program

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