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Understanding Long-Term Care Insurance

The basics of what you need to know

COVERED SERVICES

Some insurance companies require you to use services from a certified home care agency or a licensed professional, while others allow you to hire independent or non-licensed providers or family members. Companies may place certain qualifications — such as licensure, if available in your state — or restrictions on facilities or programs used. Make sure you buy a policy that covers the types of facilities, programs and services you'll want and that are available where you live. (Moving to another area might make a difference in your coverage and the types of services available.)

Policies may cover the following care arrangements:

Nursing home: A facility that provides a full range of skilled health care, rehabilitation care, personal care and daily activities in a 24/7 setting. Find out whether the policy covers more than room-and-board.

Assisted living: A residence with apartment-style units that makes personal care and other individualized services (such as meal delivery) available when needed.

Adult day care services: A program outside the home that provides health, social and other support services in a supervised setting for adults who need some degree of help during the day.

Home care: An agency or individual who performs services, such as bathing, grooming and help with chores and housework.

Home modification: Adaptations, such as installing ramps or grab bars to make your home safer and more accessible.

Care coordination: Services provided by a trained or licensed professional who assists with determining needs, locating services and arranging for care. The policy may also cover the monitoring of care providers.

Future service options: If a new type of long-term care service is developed after you purchase the insurance, some policies have the flexibility to cover the new services. The "future service" option may be available if the policy contains specific language about alternative options.

POLICY COVERAGE AMOUNTS AND LIMITS

Long-term care policies can pay different amounts for different services (such as $50 a day for home care and $100 a day for nursing home care), or they may pay one rate for any service. Most policies have some type of limit to the amount of benefits you can receive, such as a specific number of years or a total-dollar amount. When purchasing a policy you select the benefit amount and duration to fit your budget and anticipated needs.

"Pooled benefits" allow you to use a total-dollar amount of benefits for different types of services. With this coverage option you can combine services that meet your particular needs.

To determine how useful a policy will be to you, compare the amount of your policy's daily benefits with the average cost of care in your area and remember that you'll have to pay the difference. As the price of care increases over time, your benefit will start to erode unless you select inflation protection in your policy.

Next: Qualifying for benefits. »

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