Introduction: Long-term care insurance policies are increasingly important for people who want a safety net and the peace of mind that comes with it, knowing they’ll be looked after if they someday need help with everyday activities because of age, illness or disability. To be sure to have the coverage you need as the need for long-term care services increases, you need to understand the various types of long-term care insurance policies. This essay is a rundown of the different types of long-term care insurance policies. You’ll learn what each long-term care insurance policy does and what conditions are required for it to pay out. Taking the time to understand the options will help you ensure your future is well-funded and protect you from the shock long-term care could deliver to your nest egg. Traditional Long-Term Care Insurance The most common type of long-term care insurance coverage is the traditional long-term care insurance policy. Traditional policies pay for many different kinds of long term care, including care at home, assisted living facilities, adult day care centers, nursing homes and hospice care. How much a policyholder pays depends on several factors, including how old they are when they buy the insurance, their health and how much coverage they want to buy. Traditional policies are considered comprehensive. However, they have their limits. They might not start paying your bills until your disability or cognitive impairment has lasted a certain amount of time - a waiting period. They might also exclude pre-existing conditions. Hybrid Long-Term Care Insurance Hybrids are called hybrids because they’re a mix of long-term care insurance and life insurance or annuities. Hybrid long-term care insurance pays a death benefit if you die without needing long term care. So, you know if you buy the insurance, your premiums won’t be wasted. The big selling point of hybrids is most policies offer a third option. Besides adding to the advantages of long-term care coverage or life insurance, you can tap the coverage to supplement your retirement income. Hybrids tend to be more expensive than traditional long-term care insurance. Long-Term Care Riders A rider is an addition or change to a life insurance or annuity policy and that's the idea behind a different kind of long-term care insurance coverage: the long-term care rider. Long-term care riders are linked to existing annuity or life insurance policies and enable policyholders to tap those policies' long-term-care benefits. Long-term care riders can be a more affordable way for some people to buy long-term care coverage, since they offer long-term care benefits at what are often lower costs than buying traditional long-term care insurance. However, riders don’t provide as much coverage as standalone long-term care insurance on the open market. Self-Insuring The cost of long-term care varies widely, depending on the intensity of the services you receive. The national average cost of staying in a nursing home is $92,000 per year for a private room. Cost aside, not everyone has access to long term care insurance private coverage because of cost or because health conditions make them ineligible. For that reason, some individuals set aside their own money to pay for long-term care. That’s called self-insuring. Self-insuring is an option for those with major financial resources who can shoulder the burden of long-term care expenses and potentially related expenses without jeopardizing their financial situation. That plan offers the greatest amount of flexibility and it doesn't have the complexity of policy payments, policy features or a tax-qualification mess to deal with each year. However, it’s a huge financial risk if long term care needs hit out of the ballpark or if your estimate of the cost of care ends up being well off-base when you set up your plan. Conclusion: It is important to your future to understand your options when it comes to long-term care insurances. A traditional long-term care insurance policy, hybrid policies, long-term care riders and self-insuring all have their advantages and disadvantages. The various options offer a range of benefits and risks. By considering your needs, your finances and your risk tolerance, you’ll be prepared to make an educated decision about what makes the most sense for you. No matter what you choose having long-term care insurance will guarantee you some financial security and peace of mind if you need long-term care.
