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Most of us will live a long life.  However, if we live too long, our bodies are likely to wear-out, creating the high probability that long-term care will be needed.  When such care is required, the consequences can be devastating to families, especially if it continues for many years.  Presently, there is not a government entitlement program - Medicare, Medicaid, and Veterans Administration that will pay all the costs, especially if our intent is to remain at home.  In such an event, the costs will have to be paid out of retirement savings.  At the time of retirement, the life savings were not viewed as a way to pay for long-term costs, but as a means to provide for a secure retirement, including lifelong dreams and family.  Thus, long-term care for one family member could result in a reduced quality of life for the rest of the family.

Long-term care insurance does not have to replace family, but it can sure help them provide care better and longer.  The insurance can be used exclusively, or just as a tool to subsidize family members who have other responsibilities.  A healthy spouse can become ill trying to provide all the care.  Most policies offer care coordination services to help put a plan of care together, find caregivers in the area, and oversee the process.  We should not underestimate the importance of this feature, because a care manager can make the entire difference in how smoothly the process can work for a family.

If you look at the big picture, long-term care insurance can be simple.  If your doctor or licensed medical practitioner certifies that you need care or stand-by assistance in two or six specifically-defined activities of daily living, or if you need help due to cognitive issues, such as Alzheimer's or dementia, you will qualify for benefits.  The six activities of daily living are: bathing, eating, dressing, transferring, toileting, and continence.  For Alzheimer's and other similar cognitive issues, you do not need to separately satisfy any of these six areas if your doctor thinks it is unsafe for you to be alone.  Long-term care benefits are triggered if it is determined that you will need help in these areas for more than 90 days - generally not short-term care or rehabilitation.  Generally speaking, if you are in poor health - high blood pressure, asthma, depression, extremely overweight, and even controlled diabetes, you do not qualify for coverage.

If you have qualified for benefits, virtually all plans sold today will pay for care at home, adult day care, assisted living, and nursing home.  Among these plans, you have the choice to pick a plan that reimburses your expenses, or pays you a set amount of cash, regardless of how much care you receive.  They are called either reimbursement or indemnity plans.  There are a few different variations of these models, but there are common trends that most plans tend to follow.

Reimbursement plans reimburse you for your expenses, up to your chosen benefit amount.  The indemnity models have appeal because even if you spend only $75 for care in a day, you will still receive the full benefit that your policy specifies.  So, if you purchased a policy that will pay $250 per day, you may have received $175 extra.  The only requirement is to show that you received some care during a particular day, but you can toss the remaining receipts for that day.  Any extra payments are considered tax-free income up to $290 per day for the tax year 2010; unless you actually have receipts showing the cost of care received that day exceeded $290.

The main reasons why indemnity plans can be attractive are:

• You can hire unskilled caregivers to do simple tasks such as shop for groceries or shovel snow;
• A family caregiver that is losing time at work can be reimbursed;
• You don't have to worry whether a service is covered, or save all the receipts from that day for claims purposes.  Just save the first receipt for qualified care only and the full benefit will be send;
• You can bank the extra money and save it for a day when you have significant care needs; and
• A spouse who can't qualify for coverage due to health reasons can tap into the extra funds from your policy if you are receiving services at the same time.