Pros & Cons of Long-Term Health Insurance

The chances that you will need long-term care increase with age.
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If you’re thinking about buying long-term-care insurance, you need to consider several factors. Your age, individual health status, family medical history and future financial situation each play a role in determining the services you want covered, the daily benefit amount and the length of the benefit period you choose. Low income individuals who can't afford long-term-care insurance or to pay expenses out of pocket might qualify for Medicaid -- a state and federal medical assistance program that pays for long-term care.

Savings Protection

People suffering from Alzheimer's and individuals who are left disabled following a stroke or spinal cord injury are some of the people who need long-term-care services. Long-term care differs from medical care in that it provides services to help a person with basic activities of daily living such as eating, bathing, toileting and ambulating. According to the Kaiser Commission on Medicaid and the Uninsured, more than 10 million adult Americans need long-term care services, 58 percent of whom are age 65 or older. For those who need nursing home care, the average stay is 835 days. Therefore, even if you have substantial assets, the cost of long-term care can quickly use up your life savings. A long-term-care policy protects your savings by helping to pay the expenses of residing in a long-term-care facility or receiving long-term-care services in your home.

Availability of Broad Coverage

While a person may depend on others for assistance with activities of daily for weeks, months or perhaps permanently, neither Medicare nor most health insurances pay for a long stay in a nursing home. After 100 days for which a physician must certify that you need daily skilled care, Medicare no longer pays for services you receive in a skilled nursing facility. If you require long-term care in a nursing facility or extended home health care services, having a long-term-care policy can put you at a financial advantage. Many policies offer broad coverage that includes skilled nursing care, assisted living care and home health care. You can choose your daily benefit amount, which affects the cost of your premium. In addition, the policy you choose should cover preexisting conditions such as diabetes, heart disease, cancer or any other chronic or debilitating health condition for which you are at a higher risk.

Premium Rates

Affordability is one of the first things to take into account when deciding if long- term-care insurance is right for you. The cost of long-term-care insurance is a major disadvantage as it can be expensive. Premium rates for the same coverage vary widely from one company to the next. The cost of different benefit packages also varies; therefore, it pays to shop and compare the rates of several insurance providers. Waiting until you are older to buy long-term-care insurance increases the cost. Similar to a life insurance policy, the younger you are when you take out a policy, the lower the premiums will be. Purchasing a policy at age 65 will cost you thousands of dollars more in annual premiums than buying a policy at age 50. You may also have a tougher time qualifying for long-term-care insurance if you wait until you are older before you buy.

Cost of Inflation

Generally, long-term-care policies pay a fixed dollar amount for each day you receive covered services. Because the cost of care increases over time, the benefit you buy may not be enough to cover the higher cost of care in the future. For this reason, most policies give you the option of buying inflation protection that increases the daily benefit. Some inflation riders automatically increase the daily benefit and premium each year. Depending on what type of inflation rider you choose, your premiums may eventually increase by 50 to 60 percent. Another disadvantage is that if you purchase an insurance rider later on, the increase in your premium is based on your age at that time. When choosing a benefit period, purchasing a shorter benefit period can save you money on premiums, but your benefits may run out while you still need care.

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