What Should You Know About Purchasing Long Term Care Insurance?

Whether you're helping a parent or other loved one navigate the often-confusing process of obtaining long-term care, or have found yourself in a situation in which you need to finance this care for you or a spouse, you may have many questions. How will you pay for long-term care? Will you go bankrupt if your spouse enters an assisted living facility? When should you purchase long-term care insurance -- and what does this insurance cover? Read on to learn more about the ins and outs of paying for long-term care.

What is long term care insurance?

Long-term care insurance, or LTC insurance, is similar to health insurance -- however, rather than simply paying for healthcare-related expenses after you've met your deductible, it pays the full costs of your treatment or residence in an assisted living facility, nursing home, hospice, or other long term care provider. 

What does this insurance cover?

Because each policy is different, it's important to work with an insurance agent who is experienced in these products to ensure that you'll have coverage for everything you want. For example, certain long-term care insurance covers only nursing homes -- so if you are involved in a car accident and are transferred from the hospital to a rehab or assisted living facility, this stay might not be covered by either your health insurance or your LTC insurance. 

There may also be a waiting period before benefits kick in. For example, some policies require you to pay for this care out of pocket for several months before your LTC insurance begins making payments. Other policies will prohibit you from making a claim against your LTC insurance before you've held this policy for a specified period of time (usually one year). 

Are there any disadvantages to LTC insurance?

Although LTC insurance provides a tremendous benefit to many individuals who would otherwise be forced to make some tough choices on care and quality of life, these policies aren't right for everyone.

Many LTC insurance providers will not sell their products to consumers over a certain age -- so if you'd like to purchase LTC insurance, you could be paying an annual premium for years (or even decades) before you're ever able to take advantage of your policy. In some cases, LTC insurance providers may declare bankruptcy, rendering the benefits for which consumers paid worthless.

In many cases, if you allow your LTC insurance policy to lapse (by making a late payment or skipping a payment) you'll be ineligible to purchase a future policy. 

For these reasons, LTC insurance is only a good idea if you can easily afford the annual premiums, if you have a substantial nest egg that you'd like to avoid using for your own long-term care, and if you choose a reputable, financially-solvent company that is unlikely to fold before you need to take advantage of your benefits. 

What are your other payment options if you choose not to purchase LTC insurance?

If you or a loved one needs assisted living services and you don't have LTC insurance, there are still a few other options that can help you avoid paying out of pocket. 

If you're transferred directly from a hospital to assisted living (after at least a 3-day hospital stay), you may qualify to receive up to 100 days of assisted living care fully paid by Medicare. This can give you the chance to recuperate and heal without worrying about money.

If you're facing a longer stay, you may want to shop around for additional programs. The federal government offers a number of options (including Supplemental Security Income and the PACE program) that should help you cover the costs of skilled nursing care. Click here to find out more about your options for medical care for an elderly loved one.