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Covering the Costs of Long Term Care —
LTC Insurance Basics

With all of the fantastic scientific breakthroughs in medicine, people are surviving accidents and diseases that might have been deadly just ten years ago. With better long term care (LTC), people are living longer, healthier lives and extending the life span by years every generation.

The ability of doctors to prolong life is welcome, but does create one major problem. The costs of getting sick are growing more expensive every year. To pay for the wonder drugs and new medical technology that can sustain life, the hospitals, hospices, convalescent facilities and nursing homes that provide long term care have to charge very high fees.

The elderly and others who require long term medical care are faced with bills that they cannot pay and that their insurance may not cover. Many families are faced with a tremendous burden just at the time that kids are starting college or when a couple were planning retirement without worrying about finances.

The costs of LTC depend on where you live and what choices you make regarding the care. Staying at home or with family will be less costly than moving to a nursing home or an assisted living facility. A Kiplinger's report from 1999, reported by EF Moody, found that Alaskans could expect to pay an average of US$413 per day for LTC while in Oklahoma and Louisiana the cost were closer to US$90 a day. A similar study in 2000 by Met Life found, "Manhattan is the costliest at $295 per day for a private room while the Hibbing, Minnesota area is the lowest at $90, with prices dependent on supply and demand and the cost of living." The average daily cost for nursing home care in the United States was US$153. That comes to US$4743 a month on average...and that was in 2000.

According to statistics from the US Census Bureau released in 2009 there are 52,503,576 Americans over the age of 60 and more than 5 million older than 85. Current estimates are that some 55 per cent of Americans who are 85 or older, more than 2.5 million, need LTC. By the year 2020, that figure is expected to rise to 12 million.

Traditional health insurance policies and disability insurance usually do not cover the cost of long term care. Most insurance policies have a limit both on the amount of time they will cover and on the amount of money that can be reimbursed.

This gap has created a financial hardship and emotional turmoil in many families. To fix this problem and cover the costs of LTC, insurance companies have introduced LTC insurance.

Do you need LTC Insurance?

If you can comfortably afford to pay for 30 months of long term care, the average in the US, you probably don't need to worry about insuring yourself against the cost of long term illness, accident or aging. US$1,500,000 is the current average cost of two and a half years of LTC. That's a big expense, especially when you compare it to the cost of LTC insurance.

Long term care insurance policies are designed to help cover the cost of licensed nursing homes, adult day care, convalescent hospitals and home care. MS, Alzheimer's and Parkinson's are common diseases that require long term health care. Hospice care, elder care and rehabilitation after a major accident, heart attack or stroke are just some of the situations where this insurance can be used. There are many companies that write LTC insurance policies and the deductibles, coverage, limits and exclusions vary. Shopping around and doing your homework before deciding on any policy is always a good idea.

It is best to be prepared to handle the financial drain of long term health care before it becomes a crisis. Talk to your financial advisor or your insurance broker to find out more details and to decide if LTC insurance is something you or your family should consider.

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