Long-Term Care Insurance

What is Long–term Care?

Long–term care refers to a wide range of medical, personal and social services. You may need this type of care if you have a prolonged illness or disability. This care may include help with daily activities, as well as home health care, adult daycare, nursing home care or care in a group living facility. Long–term care insurance is one way to pay for long–term care. It is designed to cover all or some of the services provided by long–term care.

On March 23, 2017, the Division of Insurance hosted a Long-Term Care Insurance Forum to present the basics of long-term care insurance.  The conference discussed how to understand a long-term care policy and how premiums are established by the insuring company.  The material presented is available via this link and includes updated annual care costs for 2021. 

The National Association of Insurance Commissioners (NAIC) has also provided A Shopper's Guide to Long-Term Care Insurance to help consumers understand long-term care and the insurance options that can help you pay for LTC services.  

When will benefits be available?

Long–term care policies have an elimination period, which is the number of days you must need nursing home care or home health care before your policy pays benefits. A shorter elimination period will mean you pay a higher premium. Elimination periods may range from 0 to 180 days. In addition, a long–term care policy does not guarantee coverage unless you satisfy certain requirements. For example, most policies require that you be unable to perform a given number of daily living activities, such as dressing, bathing and eating without assistance. Also, most policies have a benefit trigger for cognitive impairment. For example: as a policyholder you can only qualify for these benefits if you are unable to pass a test assessing your mental functioning.

How much in benefits will the policy pay?

The benefits your policy pay depend on the type of coverage you purchase. You may choose a benefit period that is a specific number of days, months or years. A maximum benefit period may range from one year to the remainder of your lifetime. It is important to ask the person selling the policy if the benefit amounts will increase with inflation and if that coverage increases your premium.

Are there exclusions?

Every policy has an exclusion section. Be sure to read all the exclusions of your policy. Common exclusions include:

  • Mental and nervous disorders or diseases (except organic brain disorders)
  • Alcoholism and drug addiction
  • Illnesses caused by an act of war
  • Treatment already paid for by the government
  • Attempted suicide or self-inflicted injury

Considerations before buying long–term care insurance

Whether you should buy long–term care insurance depends on your age and life expectancy, gender, family situation, health status, income and assets.

  • Age and Life Expectancy: The longer you live, the more likely it is that you will need long–term care. The younger you are when you buy the insurance, the lower your premiums will be.
  • Gender: Women are more likely to need long–term care because they have longer life expectancies and often outlive their husbands.
  • Family Situation: If you have a spouse or adult children, you may be more likely to receive care at home from family members. If family care is not available and you cannot care for yourself, paid care outside the home may be the only alternative. Different policies may cover different types of long–term care. It is important to buy a policy that will cover the type of care you expect to need and will be available in your area.
  • Health Status: If chronic or debilitating health conditions run in your family, you could be at greater risk than another person of the same age and gender.
  • Income and Assets: You may choose to buy a long–term care policy to protect assets you have accumulated. On the other hand, a long–term care policy is not a good choice if you have few assets or a limited income. Some experts recommend you spend no more than five percent of your income on a long–term care policy.

Key points to remember

  • Long–term care insurance policies cover a wide range of medical, personal and social services.
  • Understand what must happen for a policy to begin paying benefits.
  • Understand the elimination period.
  • Understand the daily benefits provided.
  • Understand your coverage and exclusions.
  • Match your need for long–term care with your need to protect assets and your ability to pay premiums.
  • Understand how much your premium will be and how often it must be paid.
  • Your premium may increase after your purchase.