Many people, when they contemplate aging, begin to wonder how they would pay for care, should they need it when they are older. The concern is even more pressing for children thinking about how they will care for their aging parents.
As a result, consumers are turning to insurance solutions to cover care not included in regular health insurance. Through the years, two types of insurance products have been offered to serve this growing market: long-term care insurance and short-term care insurance.
Regular health insurance policies and Medicare will help cover the costs of medical treatments and hospital stays, but they don’t cover expenses such as custodial care and assistance with daily activities like eating, bathing and getting dressed when it becomes needed.
A long-term care insurance policy helps to cover these costs when an individual has a disability or chronic medical condition like Alzheimer’s disease. In most cases, policies will reimburse for the costs of care, no matter if they are received at home, in a nursing or assisted living facility, or an adult care center.
The cost of long-term care is significant and can make a sizeable dent in your savings. Depending on the kind of care needed and how and where it is received, the costs can range between $20,000 and $90,000 per year.
Long-term care insurance has the benefit of covering the cost of care for as long as it is needed (depending upon the coverage you have purchased), but policies have become considerably more expensive in recent years. Additionally, following the recession of 2008, the number of companies offering long-term care insurance plummeted from over 100 in the late 90s to fewer than a dozen today.
As you might expect, the higher prices also offer a lesser benefit compared to the policies of a decade ago.
As an alternative to long-term care insurance, many people have been turning their attention to short-term care insurance policies. These cover similar kinds of care, but for a shorter period: usually between 90 and 360 days. The short-term care insurance policies are more affordable and easier to qualify for than their longer-term counterparts. No medical examination is needed, and older applicants are eligible to apply. The cut-off age for most long-term policies is 75, but applicants as old as 89 can purchase a short-term policy.
In many states, short-term care insurance providers aren’t held to the same rigorous standards as long-term care insurance providers, so there are fewer protections for the consumer. Therefore, it’s a good idea to thoroughly do your research before making a purchase. We recommend getting several quotes and reading the fine print carefully. You may also want to have a legal professional review the policy before you sign on the dotted line.
It’s also important to note that a short-term care insurance policy may not provide sufficient coverage for the duration needed. The average stay in an assisted living facility is 22 months, so additional financial planning will be needed to make sure the costs will be looked after.
Insurance to cover the cost of care can provide a great deal of peace of mind and can help to protect your savings, but be sure that you are fully aware of the ins and outs of the product you are buying so that you have a clear understanding of the coverage you will receive.
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