What Is Long Term Care Insurance?

This is insurance you buy to pay for your stay in a nursing home.

WHERE CAN I BUY IT?

It is sold only by private insurance companies. Not all insurance companies sell it. You can contact an estate planning attorney or contact the Arkansas Insurance Commission for a list of companies that are allowed to sell it.

WHO SHOULD BUY LONG TERM CARE INSURANCE?

The odds are 1 in 1200 that your house will catch on fire. The odds are 1 in 400 that you will be in a car accident. The odds are seven out of 10 that either you or your spouse will go to a nursing home. If you can qualify and if you can afford it, you should seriously consider buying it.

IF I BUY IT AND I DO NOT HAVE TO GO TO A NURSING HOME, HAVEN'T I WASTED MY MONEY?

Most policies will not give you back your money if you do not have to go to a nursing home. Some policies will refund a portion after you have paid in for a certain amount of time.

WHEN SHOULD I BUY LONG TERM CARE INSURANCE?

The longer you wait, the higher the premiums will be. Most companies will not sell it to anyone under 45 or over 84. If you buy in your 50s, the premiums will be in the $30-$60 range per month. If you buy in your 70s, the premiums will be in the $80 - $150 range per month. If you wait until you are too sick, then you will be turned down for coverage. You cannot buy fire insurance when your house is on fire.

WHAT ARE THE BASICS OF LONG TERM CARE INSURANCE?

  • Daily Benefit: You decide how much you want the insurance company to pay per day for your stay in the nursing home.
  • Time Deductible: Just as you have a deductible on your car insurance, you have a deductible on your long term care insurance. However, instead of deciding whether you will have a $250 or a $500 deductible, you decided whether you will pay for the first month or first two months, etc. The more months you agree to pay, the less your premium will be.
  • Years of Payment: You can decide how many years you want the company to pay for your stay. You can pick from one year to the rest of your life. Some companies will say that they don't sell by the year. They will say that they just sell a "pool" of money. For example, if you paid for an $80 a day daily benefit for one year, then the insurance company would pay a total of $80 X 365 days = $29,200. If the price went up to $90 a day then the insurance company would stop paying after the $29,200 was used.
  • Home Care Option: You may not be sick enough to need the type of care you would receive in a nursing home, but you still need some help with feeding and clothing yourself. If you pick this option, the insurance company will pay the person you hire to come in and help you in your home. With some policies this is part of the package, with other policies it is an extra benefit that you must pay for separately.
  • Inflation Protection Option: The rate of inflation in many nursing homes is between 2% - 5% per year. A general rule to follow is that if you are under 65, you should consider this option. If you are over 65, you may want to pass. However, each person should evaluate their own circumstances. This option usually increases the premium a lot. You may want to check and see if buying an additional $10 - $20 of daily benefit would be more cost effective.
  • Activities Of Daily Living: This is how the insurance company is going to determine if they are going to pay on your claim. These are things such as walking, feeding, bathing, going to the toilet, getting up out of a chair, etc. Most policies will pay if you cannot do two or more or three or more of these things.

Most policies cover senility, dementia and other problems similar to this. In Arkansas, it is mandatory that the policy cover Alzheimer's Disease.