Long-term care insurance - the basics

This guide will explain the basic principles of long-term care insurance that covers necessary medical, home health care and custodial care services delivered outside a hospital setting, such as nursing home care, assisted living, or home health care. One year in nursing home care can cost an average of $80,000, and it's this facts alone that drives many people to buy a long-term care insurance policy. If your parents live far away and there are no other relatives who can provide care for them, long-term care insurance can also cover personal and home health care while they recover from an illness or injury.

1. Skilled care (nursing home care)
   This care requires a doctor's orders and is provided by physicians, nurses and registered therapists, usually at a long-term care facility such as a nursing home or assisted living facility. The high cost of skilled care is the major reason most people buy long-term care policies.
    
2. Intermediate care (home health care)
   This care is provided by trained personnel under the supervision of a doctor or nurse and includes home health care such as occupational, physical, respiratory and speech therapy, nursing care, social work and nursing-assistant services. Intermediate care coverage is very helpful because it offers an alternative to nursing home care.
    
3. Personal or custodial care 

   Custodial care involves non-medical personnel helping with the tasks of daily living (ADL) such as bathing, transferring in and out of beds and chairs, meal preparation and medication reminders. Most companies require that the insured person be unable to perform at least two ADL tasks before coverage kicks in. They'll frequently send out a company nurse to assess the situation.

    

   Custodial care coverage can prevent your parents from going down the slippery slope into a nursing home when they really don't need to be there. Your mom could be recovering from a bad flu and, while she probably wouldn't need a registered nurse, she might need someone to cook meals, shop, get prescriptions filled, help with bathing, monitor health status and alert you if she needs to see a doctor.
    
4. Respite care 
   This is temporary custodial care meant to relieve a caregiver who normally provides full-time care to an insured person. For many companies, this is an add-on to a regular policy.

1. Ask the agent to spell out clearly what the company defines for each level of care and to tell you who decides if that level of care is needed.
2. Make sure the policy is tax-qualified. Federal law now allows individuals to deduct a portion of the premium. 
3. Check to see if your state has a 30-day "free look" provision for a long-term care policy so you can cancel it within 30 days of enrolling if you change your mind.
4. Get "compound inflation rider coverage" which means that the daily benefit increases over time. Say, for instance, that you buy a policy today that pays out $110 per day because that’s the average cost of a nursing home in your area. In 20 years, if you calculate a modest five percent inflation rate, that nursing home cost would rise to $292 – more than twice the amount you'd receive. With the rider, your premium will cost more, but inflation protection is an important feature.
5. Ask the agent about any restrictions surrounding the hiring of help. For instance, can you hire a relative who is a nurse's aide?
6. Find out about the appeal process should you disagree with the level-of-care decision the company makes.
7. Choose a policy that allows you to redirect your benefits from home care to nursing home care and vice versa. For example, if you exhaust your nursing home benefit, but have untapped home health care benefits, the company should add the home health care amount to your nursing home care.
8. Don't assume that if the care is provided by a nursing home, it's automatically covered. Ask for clarification. While some nursing homes provide custodial care and assisted living, these are not covered under the skilled nursing care provision of a policy.