What is Long Term Care Insurance?

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.

Many may believe they can rely on Medicare to cover standard long-term care. But there may be a significant difference between what Medicare can pay for and what you’ll have to pay for. As a result, not having long-term care insurance could leave you on the hook for covering the difference.

Luckily, a long-term care policy can do much in the way of carrying the financial burden. But there is no be-all and end-all plan. How much you pay for long-term care insurance boils down to your age, chosen daily limits, the types of services you’ll require, your general health and more. An insurer can help you find the right amount of protection so that you’re not paying more than you have to.

Remember, if you haven't considered long-term care insurance because you think you'll be able to fall back on your employer's health plan, or on Medicare, you may find yourself coming up short when it comes time to cover the expense of an extended period of care.

That's because Medicare and most forms of private health insurance will only cover skilled care on a short-term basis, and typically only under very specific conditions, according to the HHS. And they typically don't provide any coverage at all for custodial care.

The best time to purchase long-term care insurance is in your 50s or 60s, says CBS News. Reasons include lower rates, health eligibility and more time planning. Holding off until you’re older and/or in poorer health may take a toll financially.

If you’re unsure whether to purchase coverage now or later, it never hurts to speak with a financial advisor or long-term care insurance company. And as with any type of insurance, it’s always a good idea to compare multiple quotes to assure you’re getting quality protection at a price you can afford.