How does long term health care insurance work?


Long term health care insurance provides the insured with the money he needs to pay for long term care services, including fees for:

  • an assisted living facility
  • a nursing home
  • an adult day care facility
  • in-home care
  • a visiting nurse
  • a rehabilitation facility

This way, a person does not have to use up all of his savings just to pay for long term care. There are also some riders that he can opt for. This may include payments for ambulance service fees, modification in the home to adjust for the disability/illness, payment for training a family member to be a caregiver, and payments for hospice care.

A long term health care insurance policy will usually cover services above and beyond what is provided by one's regular health insurance and Medicare.  Some policies cover just one of the above facilities while the others provide benefits for more. There are also policies that will provide a stipend for a family member to act as the one providing the care.

What happens is you apply for this policy, pay the premiums over a specified period of time. When you have such a policy, you make a claim for the benefits when it is time for you to make use of a long term health care facility. You have to be eligible for this benefit by meeting the criteria as set forth in the policy.

Then, when your claim has been approved, there is a waiting period before the policy will start the payments. During the waiting period, it is assumed that you will be able to make the first few payments out of your savings or some other sources. The waiting period is one way where your premiums may either increase or decrease. If you have a longer waiting period, your premiums will be higher.

This kind of policy pays either through:

  • Reimbursement. The insurance will reimburse you for what you spend for long term care, up to a specified limit.
  • Indemnity. What will be paid would be the daily or monthly benefit amount as stated in the policy.
  • Lump sum. Some policies also pay a lump sum for you to spend at your discretion. Depending on your priorities, you can use it for your medical expenses, equipment to help improve your quality of life or even go on a vacation.
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