Merritt Personal Lines Manual: Long-Term Care Insurance: Basics Introduction

Long-term care insurance provides a wide array of maintenance and health services -- medical care, nursing care, therapy, etc. -- if you become chronically ill or disabled and are unable to care for yourself for an extended period of time. It may pay for your care on an inpatient or an outpatient basis -- or even entirely at home. These services generally are not covered by other health insurance.

Long-term care can be very expensive. On average, a year in a nursing home costs about $40,000. In some regions, it may cost much, much more. Home care is less expensive, but it still adds up.

Home care can include part-time skilled nursing care, speech therapy, physical or occupational therapy, home health aides and homemakers. Bringing an aide into your home just three times a week -- to help with dressing, bathing, preparing meals and similar chores-can easily add up to nearly $1,000 a month or $12,000 a year. Add in the cost of skilled help, such as physical therapy and your costs could be greater.

Most long-term care policies pay a fixed dollar amount, typically from $40 to more than $200 a day, for each day you receive covered care in a nursing home. The daily benefit for at-home care is usually half the benefit for nursing home care. Because the per-day benefit you buy today may be inadequate to cover higher costs in the future, most policies also offer an inflation adjustment feature.

Some other points to consider:

• Unless you have a long-term care policy, you are not covered for long-term care expenses under Medicare and most other types of insurance.
• It makes sense for most people with substantial assets to protect to buy long-term care coverage.
• Federal law may allow you to take certain income tax deductions for some long-term care expenses and insurance premiums.

Long-term care insurance will pay your expenses if you need to enter a nursing home. It also provides coverage if you need someone to come to your home and help you with the tasks of everyday living, such as bathing, dressing and eating.

Long-term care (LTC) insurance is a relatively new idea. In 1980, only about a dozen insurance companies offered this kind of coverage -- by the mid-2000s, hundreds of insurance companies offered this coverage and millions of Americans had purchased policies.

Why is the market growing so quickly? There are a number of reasons, including:

• the aging of our population;
• longer life expectancy;
• increasing health care costs; and
• the fact that government programs often do not provide the kind of coverage needed -- or desired.

You can get LTC coverage on an individual policy or through an employer-sponsored group program. Or you can add an LTC rider to a standard life insurance policy.