Long-Term Care Insurance 101

There are three main types of long-term care insurance: traditional long-term care insurance, hybrid long-term care insurance and life insurance with a long-term care rider. Each type of coverage has different pros and cons worth considering.

Long-term care insurance typically covers both in-home care and care received at a specialized facility like an adult day care, an assisted living facility, a nursing home or a memory loss unit.

There are many variables that go into deciding how much long-term care insurance you need. They include your budget, you and your family’s health history, your financial situation and the cost of care where you reside. Also, because almost all long-term care insurance policies are bundled with life insurance coverage (or an annuity), you will also want to consider that coverage level as well. A licensed insurance agent can help you consider your options and make the best choice.

Today, most long-term care insurance policies come bundled with life insurance coverage. Because both long-term care insurance rates and life insurance rates generally increase with age, it’s best to start shopping for a hybrid life insurance and long-term care policy when you’re in your 40s or 50s. That said, you can still buy a policy if you’re in your 60s or older⁠—just know that you’ll probably pay more than someone who’s younger.

While the cost of long-term care varies by facility and by where you live, it’s safe to say the cost is considerable. Long-term care costs range from $19,500 per year for adult day care to $102,200 per year for a private room in a nursing home.² This kind of expense can quickly deplete your nest egg, which is why long-term care insurance is such an important coverage to consider. Many people are surprised to learn that long-term care coverage costs less than they imagined. You may even be able to deduct the cost of long-term care insurance premiums from your state and federal taxes.

 

There are three main options when it comes to getting a long-term care insurance quote and buying coverage. They include working with a licensed insurance professional, buying coverage through an employer-sponsored plan and buying coverage through an association or membership group like a trade association or alumni group. There are pros and cons to each of these three options.

Because almost all long-term care policies are now hybrid policies that also include life insurance coverage, you will want to review your policy whenever you experience a major life change like a marriage, divorce or death in the family. It’s also a good idea to review your coverage once a year with a licensed insurance agent. This is especially true if your long-term care coverage includes a compound inflation rider or a purchase option.

 

You first need to meet the elimination period before your long-term care insurance policy starts to pay for care. The elimination period can be thought of as a deductible measured in time instead of money. A typical elimination period for a long-term care insurance policy is 90 days. Once that is met, you typically need to experience either severe cognitive impairment or be unable to perform two activities of daily living such as dressing or feeding yourself.

 

 

Before you file a long-term care insurance claim, it’s a good idea to review your policy to make sure you met the elimination period and the conditions that qualify you for benefits. If everything checks out, you should contact the insurer and request a claim packet. It will contain paperwork that both you and your attending physician will need to fill out. Once the insurer reviews the paperwork, they will typically set up a phone interview with you (or your legal representative if you’re cognitively impaired). The insurer will then review all the information from the paperwork and the interview to determine if you qualify for long-term care benefits.