What is Long Term Care Insurance?

Long-term care insurance helps cover the cost of services for those with chronic illnesses or disabilities, or services related to elderly care. This may include daily personal assistance with bathing, getting dressed or bedtime care, as well as respite care or home meals, to name a few.

The high cost of long-term care may not be something you want to think about, but you probably should. According to the U.S. Department of Health and Human Services (HHS), nearly seventy percent of people turning age 65 can expect to use some form of long-term care in their lives.

With such care averaging $229 a day for a private room in a nursing home, according to the HHS, it can quickly deplete your savings if you're not prepared.

That's where long-term care insurance can help. Let's break it down so you can decide if it's the type of policy that's right for you, or for a member of your family.

As people grow older, there is a high likelihood they’ll need some level of long-term care. A huge reason to purchase long-term care insurance is the rising healthcare costs, according to CBS News. Assisted living can come out to more than $4,500 a month, for instance. Long-term care coverage helps pay for a wide variety of services, which can help do much in the way of alleviating financial burden.

Long-term care insurance is designed to help pay for services that offer you two kinds of assistance:

• Custodial care
  Support with personal everyday tasks, like bathing, eating or going to the bathroom.
• Skilled care
  Support from a medical professional, like a nurse or therapist

Most people picture these types of services taking place in a nursing home, but such care can also happen in an adult day care, an assisted living facility, or even at home, says the Insurance Information Institute (III).

You can typically purchase a long-term care policy like you would any other policy. The way reimbursement works may differ from insurer to insurer but often you may have to pay for the services for reimbursement later, according to CBS News. Insurers will likely work with you to find coverages that meet your specific needs.

Here are a few things to consider:

Daily and lifetime limits

Policies are typically designed to reimburse you for qualifying expenses, with daily and lifetime maximums, says the III. In other words, you’ll choose a daily limit for coverage and expenses outside of your chosen coverage may need to be covered by you.

One way an insurer may help you determine your daily limit is to estimate daily expenses for long-term care, then subtract how much you can comfortably pay on your own from that amount. That final number can help provide a benchmark for coverage.

Triggers

Policies typically have certain triggers that need to take place before they'll start providing coverage, says the III. One common trigger is experiencing cognitive impairment due to something like Alzheimer's or Parkinson's disease. Another might be inability to perform two or three everyday personal care tasks because of an illness.

Waiting period

There's also typically a waiting period before an insurance company will begin paying benefits, the III says. How long benefits kick in after those triggers occur may vary from insurer to insurer, but a common standard is 90 days after you’re unable to complete about a third of your normal living activities, says CBS News. Again, those activities may include bathing, eating, toilet activities and more.

If you recover from your illness before the waiting period ends, the policy likely won't pay for expenses you may have accumulated during the waiting period.