Your Money

The earlier the better in buying long-term care insurance

Certified financial plannerJanuary 27, 2013 

Aging is a natural part of life and while we all want a life that is long and healthy, many people experience disabilities that keep them from being able to live without the assistance of others.

The purpose of long-term care insurance is to offset the costs associated with caring for a person who can no longer perform activities of daily living without assistance. Activities generally recognized by insurance companies include: dressing, bathing, using the bathroom and feeding. Cognitive impairment caused by illnesses like dementia or Alzheimer’s also triggers benefits.

When the policy holder satisfies the requirements to receive benefits, those benefits usually are paid as a daily or monthly benefit up to a maximum amount. For example, assume that a policy pays up to $150 per day. If the person spends more than that amount for care, then they are responsible for the portion in excess of $150. However, if they spend less than the daily maximum, some policies allow them to extend the term of the benefit if the maximum benefit has not been exhausted.

It is rare that long-term care coverage is sufficient to cover all of the costs associated with prolonged care giving needs. However, it does enable individuals to use less of their financial resources to cover these ongoing costs. As a result, families reduce the risk of depleting their assets and leaving a surviving spouse with limited assets.

Just like health and life insurance, it is best if you purchase long-term care insurance prior to any significant health issues. The reason is that pre-existing conditions, like diabetes, often make it difficult to afford or qualify for coverage.

One of the myths concerning long-term care insurance is that Medicare pays if you need in home care or move into a nursing home. This is not true. Instead, Medicare is a health insurance program that covers doctor’s visits, hospital stays, and prescription drugs.

Medicaid, however, can cover some long-term care expenses, but only for those individuals who it is designed to serve – the poor. Consequently, most Americans do not qualify for Medicaid as their income or assets exceed the guidelines for eligibility.

The second misconception is that these policies cover only the cost of skilled care in a nursing home. While years ago this was often the case, those limitations are abnormal for today’s policies. Instead, many offer options to help you live in your home longer by allowing you to use your benefit to pay for skilled or unskilled in-home care, light housework, and adult daycare. Some even cover medically necessary modifications to your home, like building a ramp for wheelchair access. If you already have a policy, confirm with your insurance company what is covered and what is not.

Cost is one of the top reasons that people do not purchase long-term care insurance. Yes, these policies are expensive, especially if you already have health concerns. But when shopping for low-priced policies also consider the reputation of the insurance company. There is nothing worse than filing a claim with an insurance company, then getting frustrated as it either denies your claim or pays too slowly for comfort.

That is why it is advised that you research the potential insurance companies before purchasing a policy as all insurance companies are not created equal.

Stated plainly, long-term care insurance protects you from financial risks caused by your dependency on others to care for you on a regular basis. If your financial situation cannot afford to take the hit of needing in-home or nursing care, then it is better to devise a strategy now. After all, addressing and minimizing the risk is a far better choice than ignoring the possibility altogether.

Life is a journey, plan for it.

In two weeks: Protecting your estate with long-term care insurance.

Ashleigh Brooker, CFP, is the principal of A. J. Brooker Financial Associates in Columbia. Reach her at or (803) 724-1235.

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