What to know about long-term care coverage

Insurance can serve as a financial backstop when accidents, injuries or other unexpected events happen. While many people think of insurance in terms of car crashes or storm damage, one type of coverage is intended for needs that have little to do with broken bones or damaged property.

Long-term care insurance is designed to help people manage the growing costs that can come with longer lifespans. Recent government data showed that life expectancy has continued to rise, which is good news, but it also means people may need to adjust their financial plans to account for the expenses of aging. Long-term care insurance can be one part of that strategy.

Many families have questions about this coverage, including whether it is necessary, what it pays for and how it works. A study from the Department of Health and Human Services found that nearly half of men and 64% of women who reach age 65 will need substantial long-term care during their remaining years. The report also estimated that 14% of people will need more than two years of paid care, with costs topping $120,000.

That is where long-term care insurance may help. AARP notes that Medicare offers very limited coverage for long-term care, generally covering little beyond hospitalization after an illness or injury. Medicaid may also be unavailable until seniors have spent down their savings and other assets, aside from their homes and vehicles.

Another common misunderstanding is that government programs will pay for an extended nursing home stay. AARP cites a KFF survey showing that many people believe Medicare will cover that expense, even though it does not. Long-term care insurance can help pay for care in a long-term facility.

Understanding the basics of a policy is important before buying one.

The National Council on Aging says standalone long-term care policies usually spell out a benefit amount, a benefit period and an elimination period. The benefit amount is the most the insurer will pay each day for covered services. Many policies also include inflation protection so the benefit can keep up with rising costs. The benefit period is how long payments last, and the elimination period is the waiting time before benefits begin.

Because of that waiting period, it can be wise to buy coverage before health problems arise so the policy is in place when care is needed.

Insurance agents and financial advisers can help adults and their families compare options and choose a policy that fits their needs.