Long-term care planning

Understanding the role of long-term care insurance

Americans are living longer, healthier lives than ever before. But odds are that, during your life, you'll need some type of ongoing health care-related assistance for illness or injury.

The costs of home care, nursing homes, and assisted living facilities are rising quickly. For example, the national median cost of one year in an assisted living care facility was $45,000 in 2017. The fee for a private-pay, licensed home health aide ran about $49,192 a year, while a private room in a nursing home costs about $97,455 a year.1

Why you need to be prepared for long-term care

If you ever need long-term care, Medicaid covers only some of its costs. HMOs, Medicare and Medigap will not cover every health care expense either. As a result, out-of-pocket costs for long-term care could significantly impact your life savings.

What is long-term care insurance

Long-term care insurance (LTCI) generally pays a specific dollar amount per day for a set period of time for whatever type of long-term care is outlined in the policy. For example:

  • Most of the policy benefits are triggered by physical or mental impairments designated in the policy.
  • The most common impairments result in an inability to perform certain basic daily activities.
  • Some policies require a doctor to certify that care is medically necessary.
  • Policies offering benefits for cognitive or mental impairments often require an inability to pass certain tests.

How to compare long-term care policies

When it comes to weighing the pros and cons of different insurance policies, these tips can help to make the comparison process easier.

  • Shop around
  • Carefully read and understand the Outline of Coverage portions
  • Check insurance company ratings (through A.M. BestMoody's or Standard & Poor's) for financial stability. Each has its own system for rating companies so you may want to check more than one resource for comparison.
  • Pay close attention to and compare these provisions:
    • Elimination (waiting) period before benefits are paid
    • Duration of benefits
    • Daily benefit
    • Optional inflation rider
    • Range of care
    • Coverage of pre-existing conditions
    • Premium increases during policy period
    • Guaranteed renewability
    • Grace period for late payment
    • Return of premium
    • Prior hospitalization

Other considerations for long-term care planning

Talk to your family and financial advisor about various care and housing options and the costs for yourself and others. For instance, if your parents require long-term care, do you anticipate providing financial support for them? If you become injured or ill to the extent that you require full-time assistance, what type of care would you prefer — family members, nursing home?

In addition, your attorney and financial advisor can help you organize and address more complex questions:

  • How much money should you plan to set aside for assistance? When should you start?
  • Have you coordinated long-term care planning with your estate planning needs?
  • Have you prepared advanced medical directives?
  • Are your important documents and records organized?

Get information and advice

Ameriprise financial advisors are well-versed in the fine points of long-term care insurance and can help you decide if this insurance is right for you, provide guidance as you review policies, and incorporate provisions for LTCI into your financial plan.

By clicking the insurance company ratings links, you will leave Ameriprise.com.  The included hyperlinks are provided for informational purposes only and are not an indication or endorsement of the content therein or affiliation with respect to the linked site. Be aware that the linked site will be subject to rules, regulation, and privacy and security provisions that are separate, and may differ, from Ameriprise Financial.
Before you purchase, be sure to ask your sales representative about the insurance policy’s features, benefits and fees, and whether the insurance is appropriate for you, based upon your financial situation and objectives.
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.
Ameriprise financial cannot guarantee future financial results.
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