What is long-term care insurance?

We take for granted that Medicare will be an indispensable retirement resource for the medical costs associated with old age. But Medicare is about acute care. Most of us have older relatives who have encountered the slow, chronic problems of old age, problems that Medicare doesn’t cover. There are alternatives to consider for one who is having trouble taking care of himself or herself. These range from simple in-home assistance, which may be sufficient during the early stages of impairment, to admission to a nursing home for comprehensive supervision. Whatever path is chosen, it will require money and planning. A year in a private nursing home can easily cost $75,000, more in many parts of the country. Long-term care insurance will have a role to play in the retirement planning of many families.

Weigh the policy variables
Standards for long-term care insurance were set by the Health Insurance Portability and Accountability Act of 1996, and policies that meet those standards are “tax qualified.” For example, that law defined situations for paying benefits and the terms for tax deductibility of premium payments. But wide variation among policies remains, even variation among different policies at the same company. In one sense, it’s good that we don’t try to fit everyone into a “one size fits all” approach, because everyone’s experience and needs will be different. But on the other hand, the choices can be so bewildering that they interfere with making any decision at all. Here are some of the factors to be studied.

Services covered. Nursing home costs are what worry most people when they think about long-term care, but many policies now have features to help delay the date of admission to a long-term care facility. In-home care by a licensed aide or nurse may be covered, and some policies also cover the cost of an aide for doing routine chores.

Elimination period. Most policies require that the insured cover all costs when incapacity first sets in, which is a “deductible” of sorts. The elimination period can be 30 days, 60 days, 90 days or more. The longer the elimination period, the lower the premiums.

Amount of coverage. The benefit usually is expressed as a dollar amount, for example $150 per day. Inflation protection also may be available, but it will increase the premium.

Length of coverage. Although full lifetime coverage of nursing home expenses is the “gold standard,” the average nursing home stay is 2.4 years. Opting to limit coverage to a set number of years, such as three or four years, is another strategy for reducing costs.

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Langley Investment Agency (Langley Financial Services, LLC) is an affiliate of Langley Federal Credit Union (LFCU). Business conducted with Langley Investment Agency is separate and distinct from any business conducted with the credit union. Remember that any insurance required as a condition of the extension of credit by LFCU need not be purchased from Langley Insurance Agency, but may, without affecting the approval of the application for credit, be purchased from an agent or insurance company of the member's choice.

Securities and insurance products are offered through Cetera Investment Services LLC (doing insurance business in CA as CFGIS Insurance Agency), member FINRA/ SIPC. Advisory services are offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investment services are offered.

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