What is Long-Term Care Insurance?

Long-term care insurance is an optional insurance that can pay for at-home or nursing home care. Here’s what you need to know about it.
August 24, 2023
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Key Points
  • Long-term care insurance covers a host of care costs that aren’t covered by regular health insurance, including expenses associated with nursing home care or at-home care
  • Unlike Medicare or Medicaid, which cover a limited number of choices, long-term care insurance gives you the ability and financial resources to choose how and where you want to receive care
  • Policies get more expensive as you age, and experts typically recommend buying long-term care insurance in your 40’s or 50’s, and no later than the end of their 60’s
  • To purchase, find a long-term insurance agent that you trust to guide you through the process
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One of the biggest concerns as we age is the cost of care, and how it will be covered. Long-term care insurance is one way to prepare for these costs.

In this article, we’ll cover what long-term care insurance is and why you or a loved one might need it. For a deeper understanding of long-term care, we’d recommend Long-Term Care Insurance, Explained from NerdWallet.

What Is Long-Term Care Insurance?

Long-term care insurance is an insurance policy that covers a host of care costs that aren’t covered by regular health insurance, including expenses associated with nursing home care or at-home care.

It can be valuable in covering a wide range of care needs, and can help cover care costs in the event you or a partner develop a chronic medical condition, such as Alzheimer’s or Parkinson’s, and need round-the-clock support.

It’s important to note that Medicare provides very limited support when it comes to covering things like long-term nursing home stays or aides that can support daily activities, and Medicaid only provides support once you’ve exhausted most of your savings, so having long-term care insurance is an important tool to give you more optionality and peace of mind.

Why To Consider It

There are a variety of reasons to purchase long-term care insurance, including:

  • To avoid spending down your savings: If you end-up in a position where you need long-term care, it’s prohibitively expensive and not covered by standard medical insurance. If you don’t have long-term care insurance, you’re required to pay out of pocket for any expenses.
  • To access more care options: Unlike Medicare or Medicaid, which cover a limited number of choices, long-term care insurance gives you the ability and financial resources to choose how and where you'd want to receive care.
  • To avoid burdening family members: Having the support of family and friends as we age is critical. With that said, having that as our only means of support can be challenging, especially if we need help with day-to-day tasks. Long term care insurance can be a valuable tool to unburden relatives from care responsibilities and ensure independence if disability occurs.

When To Purchase It

When you buy long-term care insurance is critical; experts typically recommend patients buy long-term care insurance in their 40’s or 50’s, and no later than the end of their 60’s. If you have a debilitating condition, you won't qualify for long-term care insurance, and most carriers won’t approve people over the age of 75. Policies get more expensive as you age - especially if you have health issues that are likely to worsen in their later stages.

When Does It Go Into Effect?

Long-term care insurance goes into effect when you develop two or more impairments in activities of daily living, such as no longer being able to independently shower, eat, or dress yourself, or if you suffer from dementia.

How To Purchase It and Cost

You can buy long-term care insurance directly from an insurance company or through an agent. Depending on your employer, you might also be able to buy it through work. The American Association for Long-Term Care Insurance advises working with an experienced insurance agent who sells products from at least three carriers.

To buy a policy, you’ll fill out an application and answer various health questions, and the process often includes a face-to-face to phone interview. The insurer may also request medical records. The factors that determine the rate you pay are your age and health, gender, marital status, the insurance company you choose, and the amount of coverage you’d like to buy.

What To Look For in a Plan

Finding a long-term insurance agent that you trust is key to the process — they can guide you through the experience. Once you’ve done that, here are a few major considerations to pay extra attention to?

  • Duration of benefits: Plans are sold in 1-year increments, with the ability to buy up to 5 years of coverage. Consider any chronic issues that may dictate how much long-term care is needed.
  • Daily benefit amount: The daily benefit amount is the maximum amount of money the insurance plan will pay for each day of care. Any difference between actual expenses and the daily benefit amount is the responsibility of the patient. 
  • Reputation of the Insurer: There’s an array of both reputable and disreputable companies and characters in long-term care insurance. Do a quick search for the company’s background: How long have they been in business? Do they only provide long-term care insurance, or other plans as well? Are there any reviews for their service?  
  • Read the fine print: Certain plans may not cover all reasons for disability. For example, some plans have exclusions for dementia, which is a significant reason that people ultimately come to need long-term care. Other plans place restrictions on the type of care that can be provided. Reading the fine print can make sure the plan will properly cover your situation.
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