[Last updated September 25, 2024]
Adults should consider purchasing long-term care insurance so that as they age, they can cover senior care services that traditional health insurance may not. These policies reimburse and cover care for older adults with various needs, such as coping with chronic illnesses or receiving senior care services. Here are the basics of long-term care insurance and how older adults can plan for their future care needs.
What does long-term care insurance cover?
Long-term care insurance (LTCi) is a type of insurance policy that helps individuals prepare for the long-term care they might someday need. This type of insurance covers various services for adults with medical and nonmedical needs caused by aging, disabilities, or chronic illnesses. Typically, LTCi will help cover the cost of care if the individual cannot perform two activities of daily living on their own. Activities of daily living include:
- Bathing.
- Dressing.
- Eating.
- Toileting or caring for incontinence.
- Transferring.
- Ambulating.
Individuals may also be able to receive benefits for cognitive impairment. Depending on the policy, they may be able to receive care in their home or in a long-term care facility such as assisted living.
How does long-term care insurance work?
Those interested in long-term care insurance can apply by filling out an application with a provider and answering health-related questions. As a part of the application process, applicants may need to provide insurers with their medical records. Applicants can choose the coverage they want, with policies typically limiting the daily or lifetime amount paid for care.
Once the insurer approves and issues the policy, the insured will begin paying coverage. When a person needs to make a claim, their insurance provider will review their medical documents and determine coverage for their care plan. In some cases, the insurer may send a doctor or a nurse to do an evaluation. ElderLife Financial Services can help individuals make a claim on their LTCi to fund senior care.
Types of long-term care insurance
Here are the three main types of LTCi:
Traditional (stand-alone) policies
Traditional LTCi policies work similarly to auto or home insurance. The insured pays premiums while the policy is in effect and will make a claim when they need covered services. These policies will state how much reimbursement a person can receive for care daily or monthly. They also may have a lifetime maximum. The amount paid will determine the amount of care provided.
The individual typically receives these care services in their home, assisted living, a nursing home, or another medical facility. Premiums may be higher if the insured opts for benefit amounts that increase over time to protect them from inflation.
Hybrid policies
A hybrid or linked-benefit long-term care insurance policy offers combined coverage with additional benefits such as life insurance or an annuity. The policyholder pays a lump sum or divides it into regular payments for the long-term care coverage. The policyholder’s beneficiaries will receive some of the death benefits should the long-term care benefits go unused at the time of the insured’s passing. These policies are more expensive than stand-alone LTCi policies.
Life insurance with a long-term care rider
With this policy, the insured chooses to add long-term care benefits to their life insurance policy. With a long-term care rider, the policyholder can access some of their death benefits to pay for long-term care if the need arises. Using a portion of the death benefits for care will decrease the amount paid out at the time of the individual’s passing.
How much does LTCi cost?
Many factors impact the price of long-term care insurance and any tax benefits you can reap from purchasing a policy.
Factors that determine long-term care insurance costs include:
- Age and health status: The older you are, the more likely you are to have health problems, increasing how much you’ll pay when buying a long-term care policy.
- Gender: In most insurance policies, women may pay more than men, as they have a greater life expectancy and a higher chance of making more insurance claims.
- Marital status: Insurance premiums are lower for married people than for single people.
- Insurance company: Different insurance agencies will offer higher or lower prices and cover different levels of care. Research and compare quotes when considering policies.
- Amount of coverage: Insurance plans that offer more coverage will cost more. Increased coverage can include higher limits on daily and lifetime benefits, cost-of-living and inflation adjustments, shorter elimination periods (the amount of time a person must wait between filing a claim and receiving benefits), and fewer restrictions on the types of care covered.
Is LTCi tax deductible?
LTCi can be tax deductible. The federal government and some state tax codes allow policyholders to count a portion or all of their insurance premiums as medical expenses, which can be tax deductible if they meet a certain threshold. The limit on how much of the premium can be deducted increases with age.
Is LTCi worth it?
A long-term care insurance policy can protect a person’s savings from being depleted by paying for care out of pocket. Paying for long-term care yourself can defund retirement savings quickly, leaving no money for alternatives.
Having a policy also gives those insured better access to quality care. Those who rely on Medicaid have more limited options than long-term care policyholders who get coverage through their insurance.
However, many LTCi policies operate on a use-it-or-lose-it basis, meaning that if an individual never requires care, they won’t receive any financial benefit. Individuals should assess their financial, personal, family, and health considerations to determine if LTCi is worth it for their individual situation.
How can I buy long-term care insurance?
There are a number of reputable long-term care insurance providers. A person can purchase a long-term care insurance plan through an insurance company or agent. Some employees may be able to buy a policy through their jobs, as employers may offer coverage through a group rate.
[Read more: Top Long-Term Care Insurance Providers]
When can I buy long-term care insurance?
Before purchasing long-term care insurance, consider these factors to determine whether you’re ready:
- Current financial condition and financial goals.
- Age and health, including preexisting conditions.
- Other insurance options that might be a better fit.
- Amount of coverage needed.
The best time to purchase LTCi is between the ages of 50 and 65.
What might disqualify me from long-term care insurance?
Insurance providers may deny individuals coverage. A person with specific preexisting health conditions may not qualify for a long-term care policy. Insurance agencies also need proof of income or finances to confirm the individual meets the income minimum and has enough savings.
Are you considering investing in a long-term care plan? The financial concierges at ElderLife Financial can provide guidance and show you your options for long-term senior care. ElderLife Financial can also help you make a claim on your long-term care insurance policy to access the money you need. Contact us today to learn how we can support you.
