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Taking Care of Mom and Dad: Paying in Advance

Unlike Medicare and Medigap, in which premiums are paid for once a person reaches a certain age, long-term care insurance is a "pay in advance" insurance plan. Usually, people start paying for long-term care insurance prior to retirement. This way, your parents may be able to pre-fund some of the cost of long-term care. Because of the high cost of long term care coverage, the sooner your parents start paying premiums, the more cost-effective the insurance will be.

Depending on your parents' ages, the cost of care in their region, and the features they select -- such as a daily benefit that adjusts for inflation -- premiums may run from $500 a year if they're in their 40s to $3,000 if they're over 70.

Long-term care policies vary in both cost and in the benefits they cover. The following are some of the coverage items and policy features that you will find when pricing long-term care insurance:

  • definition of assisted living facility care;
  • definition of nursing home care;
  • definition of hospice care;
  • definition of in-home care (such as a visiting nurse);
  • maximum coverage time periods for each of the above;
  • exclusions for pre-existing conditions;
  • deductibles; and
  • cost-average adjustments and indexing for inflation.

Next, I'll discuss each of these issues -- and what they mean to your parents -- in detail.

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