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How Long Term Care Insurance Works

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Many people who are new to the concept of long term care insurance tend to associate the idea with nursing homes. However, long term care insurance also pays for assisted living facilities and in-home care. According to the American Association for Long-Term Care Insurance, 50 percent of long term care insurance benefits in 2011 went to pay for in-home care. 31 percent went to nursing care, in contrast. When you have a better understanding of how long term care insurance works, then you will have no problem with understanding the many different ways that it can be used when you may need it in the future.

All long term care insurance policies are fairly different from each other. Most of them have benefits that begin based on a similar definition of disability. Either you will have severe cognitive impairment or you will need some help with at least two of your daily living activities when this type of insurance becomes relevant. These activities would include eating, using the bathroom, bathing, or dressing yourself. You don’t automatically receive the benefits when you might suspect that you might need some extra help in your older age -- or even when you have moved into a retirement community. Policies are purchased with fixed daily benefits for a fixed amount of time, such as three to five years.

Long term care insurance costs can vary greatly depending on your age at the time of purchase, the amount and length of coverage, and some of the characteristics of the policy. You will also have to consider whether or not your benefits are adjusted for inflation and the amount of waiting period that’s available before benefits will be paid. The American Association for Long Term Care Insurance suggests that the average annual premium for long term care insurance in 2012 for a policy for a 50 year old with a daily benefit of around $200 for three years of coverage and a 3 percent automatic compound inflation coverage would be $2,235. Your policy cannot be cancelled unless you stop paying it and the premiums that are associated with long term care insurance cannot be increased on an individual basis for your age or for any health reasons. However, insurance companies can raise the premiums for an entire class of policyholders.

The older that you are when you purchase your long term care insurance plan, the more expensive the policy is going to be; this is why it is recommended that individuals who are interested in this type of plan should get insured as soon as possible. There is also a higher chance that you will be turned down for coverage depending on your older age. Underwriters tend to look at your health records and your mortality risk in order to determine what your eligibility for coverage would be with this plan. However, there are some companies that will give you a discount if you’re married because they may assume that spouses are likely to take care of each other longer, which would mean there would be less of an immediate need for a nursing home or other care options.