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Long term care insurance helps preserve assets in the event of a long term care situation. Payment of benefits is based on plan design chosen by the claimant. Prerequisites in the policy designate at what point the benefit will be activated.
Long term care insurance helps preserve assets in the event of a long term care situation but even more importantly allows for the ability to choose where and who will provide your care. When purchasing a policy you can elect plan provisions that will determine when your benefit will be activated and for what duration your benefit will be paid.
Many long term care insurance plans are flexible, and offer a variety of care options. Purchasers can customize the policy to meet their unique needs — allowing options for where they would like to receive care, whether that is in a nursing home, assisted living facility, adult day care facility or in the comfort of your own home. Most policies will pay benefits when a physician deems it necessary because someone can no longer perform two or more activities of daily living due to cognitive impairment or the loss of functional capacity.
Depending on the policy chosen, long term care insurance can also assist in offsetting costs associated with installing ramps and railings in the home as well as adaptive equipment such as a motorized wheel chair.
Common durations for long term care insurance policies include three years, five years and lifetime benefit durations.
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Here are a few compelling facts:
- Americans spent nearly $160 billion on long-term care services in 2004.1
- Today, the average nursing home stay can cost more than $50,000 a year. In some regions, it can easily cost twice that amount.2
- The national average stay in a nursing home is 2.4 years.3
- Bringing an aide into your home just three times a week (two or three hours per visit) to help with dressing, bathing, preparing meals and similar household chores — can easily cost $1,000 each month or $12,000 per year.4
- Long-term care costs are expected to double by the year 2025 and nearly quadruple by 2050.5
- Only 12 percent of older Americans thought they were very likely to need long-term care, even though some data indicate that 60 percent are likely to need long-term care at some point.6
- Thirty-seven percent of Americans receiving long term care are under 65.7
- Forty-one percent of adults polled indicated they do not think they will have enough money to cover their expenses as they age, and 33 percent are not sure.8
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There are two kinds of long term care insurance coverage available — indemnity or reimbursement.
With an indemnity policy, a fixed benefit is paid to the insured based on the services provided. The benefit amount is the same regardless of the expenses actually incurred by the insured.
The reimbursement policy provides benefits based on expenses actually incurred up to a maximum benefit. With a reimbursement policy, the policyholder must provide copies of receipts to verify expenses.
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The cost for long term care insurance varies depending on a variety of factors including the benefit amount, when benefits begin, the length of benefit and if any optional coverage was selected. By way of illustration, a plan sold in the workplace to a 35 year-old purchasing the $3,000/three-year professional homecare benefit would be approximately $150 to $185 per year. Since long term care insurance premiums factor age into the cost of the plans, the younger you purchase the plan, the less you will pay in premium (premiums increase with age and can increase due to class rate changes).9
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The amount and type of care included, as well as duration of benefits depends on the provisions included in your policy. Depending on the policy, long term care insurance will pay for care provided by a professional caregiver, a family member or a friend. It can be received in the home or in an institution. While most people would prefer to receive and give care at home, this may be determined by the level of care required.
In addition to care, some long term care insurance may assist with retrofitting a home for handicap accessibility from adding a ramp to the front door to widening doors to adding handrails in the bathtubs.
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No. Policies can vary according to limitations and conditions. Some policies have a longer waiting period or a shorter duration of benefits. Some have preexisting conditions that might exclude you from coverage based on treatment for alcoholism, attempted suicide or an act of war.
In addition, some policies will only cover professionally-administered care while others will include care in the home provided by a friend or family member. It is important for consumers to review policy options prior to deciding which policy is right for them.
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With most long term care insurance, any individual between the ages of 18 and 80 may apply for coverage. When group coverage is sold in an employer setting typically employees get a level of guarantee issue coverage. This means that no medical questions are asked and the individual is issued coverage regardless of their health history. For higher coverage amounts you may be asked to complete a medical application. In some cases, an interview or paramedical examination may be required. This coverage can also be extended to family members.
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While you can extend to and pay for long term care insurance for your spouse and your children through payroll deduction, other family members such as mothers, fathers, grandparents and in-laws can also apply for coverage in a group Long Term Care plan. You do not need to apply for coverage in order for these individuals to receive coverage. The same rate structure and same plan designs offered to you will apply to their coverage. No payroll deduction is allowed for these individuals, instead a direct bill is sent to their home.
Individual policies can also be purchased if a person desires to have individual coverage. Payroll deduction would not apply to these policies as they are direct billed in most instances.
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Long term care insurance may be purchased from an individual insurance advisor, at the worksite, or available as part of an employee benefit package.10
At the end of 2005, there were approximately 4.4 million individuals who were paying for long term care in the United States, a 4 percent increase compared to 2004.11
It has become the voluntary benefit most frequently requested by employees for purchase at the worksite.
This form of insurance is relatively new as an employee benefit. At the end of 2005, there were nearly 7,300 employers sponsoring group long term care insurance in the United States.12 Unum provides group long term care insurance to more employees than any other carrier.13
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