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How to Insure Your Income: Long-Term Care Coverage

A 1991 study published in the New England Journal of Medicine estimated that nearly half of the people who reached age 65 in 1990 would require nursing home care at some point. And this is expensive care. The average annual cost for nursing home care in California was about $30,700 per patient in 1990, according to the state's Department of Insurance.

The greatest risk of an extended need for long-term care is depletion of income and personal assets. For many older people, fixed retirement income can't cover the expenses of a lengthy stay in a nursing home. This presents a very real risk that family savings and income sources will be wiped out.

Long-term care (LTC) insurance policies were developed to meet these needs.

LTC insurance includes a policy, certificate or rider advertised, marketed, offered or designed to provide coverage for diagnostic, preventive, therapeutic, rehabilitative, maintenance or personal care services provided in a setting other than an acute care unit of a hospital.

Long-term care insurance includes coverage for any of the following types of benefits:

  • institutional care (convalescent facility, nursing home, extended care facility or personal care facility);
  • home care (including home health care, personal care, homemaker services, hospice or respite care);
  • community-based care (including adult day care, hospice or respite care).

When the insurance was first available, nearly all LTC policies required prior hospitalization before benefits became payable -- and nearly all policies excluded Alzheimer's disease. More recently, a number of states have passed legislation that establishes minimum standards for long-term care insurance.

Example: In California, LTC policies may no longer require prior hospitalization, they must cover Alzheimer's disease, and buyers must be offered the opportunity to purchase some form of inflation protection for their LTC benefits.

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