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How does long term care insurance work?

How does long term care work for grandma in wheelchairLong term care insurance pays for the cost of care for people who require assistance with the activities of everyday living. It can be used to fund care in a number of different locations, not only nursing homes.

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Long term care coverage is not the same thing as health insurance, even though a person applying for this type of protection must go through an underwriting process that is similar to one used by health insurance companies.

Types of Care Available

When long term care insurance was first introduced to the market in the 1980s, it was offered as a way to pay for nursing home care. Over the years, and as overall life expectancy for the North American population has increased, the importance of having this type of protection in place has become more apparent. Approximately 50% of the population is expected to need some form of long term care during their lifetime.

Long term care is not only for elderly people who may have Alzheimer’s disease, dementia or other medical conditions. Younger people who have been injured in an accident may also need this type of care if their injuries are severe enough. A person who has been diagnosed with a chronic medical condition may also require long-term care if their symptoms mean they are unable to care for themselves independently.

Modern long term care policies pay benefits when policyholders are receiving care from one of several types of facilities, including assisted living facilities, facilities specializing in treating Alzheimer’s patients and adult day care centers. The policy will also cover hospice care.

Underwriting Process

The best time to apply for long term care insurance may be when the individual is in his or her 50s. This is the time when a person is in his or her highest earning years, and is most likely to have the resources necessary to pay the policy premiums.

A younger person can apply for long term insurance coverage if he or she wishes, and the premiums would be lower as a result. The longer a person is likely to pay into the plan without making a claim against the policy, the less he or she will pay in premiums.

Not everyone in this age group is going to be insurable. A person who is interested in buying long term care insurance will need to apply for coverage. The applicant will probably be asked a series of health questions to determine how healthy he or she is right now and to determine how likely the person is to need this type of care. The more likely the applicant is to require long term care, the more risky he or she is to insure and the higher the premiums will be. Once the insurance company has reviewed all the information provided by the applicant and his or her health records, a decision will be made about whether to offer to extend coverage.

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After the Policy is Issued

Once the long term care insurance policy has been issued, the policyholder will be entitled to receive benefits if he or she becomes chronically ill. Under the terms of this type of insurance, the illness must last 80 days or more. In order to collect benefits, the policyholder must be unable to perform at least two of the activities of daily living.

Activities of Daily Living

Activities of Daily Living are defined as:

  • Dressing
  • Eating
  • Using the bathroom
  • Moving to or from a bed or wheelchair
  • Bathing
  • Continence

A person who has a severe cognitive impairment is also considered chronically ill. A disease like Alzheimer’s would put him or her in this category. Young people may think that long term care insurance is mostly for elderly patients, but the truth is that adults of any age may become incapacitated and require long term care.

Long term care insurance provides coverage to pay for the cost of receiving care when the policyholder is unable to look after him or herself independently due to illness or an injury that leaves him or her chronically ill. There are a number of choices available in this type of coverage, and a consumer should consult a financial planner for more information about which one is right for him or her. The likelihood of an event occurring that will require long-term care should be weighed against the cost of paying for it out of pocket or trying to have family members take on this responsibility.

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