Most people are woefully unprepared to cope with long-term care needs and expenses. In fact, various studies have found that individuals admit that they are confused about how to approach future long-term care challenges.They are also failing to actively build a strategy for long-term care needs, despite the possible personal and financial consequences.
I had an opportunity to discuss long-term care insurance with Carolyn McClanahan, a physician and a certified financial planner. She is the founder and director of financial planning at Life Planning Partners, Jacksonville, Fla., and a regular speaker on health and financial topics.
(Read more: Are you sick over health-care costs?)
Q: What exactly is long-term care insurance?
McClanahan: There may come a point where you can no longer care for yourself. Dementia, chronic illness or an injury may result in the need for long-term care. LTC insurance pays for health-care costs related to ongoing care not covered by regular health insurance. Custodial care in the home, assisted-living facilities and nursing-home care are typically not covered by regular health insurance or Medicare. The cost of this care can be very expensive, and long-term care insurance can help defray some of these costs.
Q: How does it work?
McClanahan: Long-term care insurance pays for care once someone loses the ability to care for themselves.The insurance kicks in once someone loses two of six of their "activities of daily living" or develops dementia. The six activities of daily living are eating, bathing, dressing, toileting, walking and continence.