Long-Term Care Insurance FAQs

Long-Term Care Insurance FAQs

March 22, 2022

Trying to figure out how long you'll live and how much money you’ll need in retirement is a hard calculation to make for most people. That’s why many adults consider purchasing long-term care insurance.

Long-term care insurance isn’t the same as health insurance (which covers hospital stays, annual check-ups, medical procedures, and prescription medication). Long-term care insurance covers costs associated with nursing home care, in-home care, assisted living, or an adult daycare facility.

Someone in need of long-term care typically needs assistance performing the Activities of Daily Living, such as:

  • Eating
  • Dressing
  • Bathing / Showering
  • Transferring / Moving from bed to chair, etc.
  • Toileting
  • Maintaining Continence

However, many are capable of performing these activities, but need assistance due to a cognitive impairment, such as dementia or Alzheimer’s disease.

The costs associated with long-term care can be very expensive. According to Genworth, the average cost of a private nursing home room in WV was more than $12,000 per month in 2021.

Assisted living and home health care are generally less expensive, but still place a significant strain on best laid financial plans.

Medicare, due to its many requirements pays for very few nursing home stays.  If you are concerned about the possible impact of long-term care expenses on your financial plan, consider protecting your savings with long-term care insurance.

What is long-term care insurance?

Long-term care insurance pays for some or all of your long-term care expenses. It's additional insurance on top of your standard health insurance or Medicare Supplement plan.

Health insurance and Medicare Supplements pay for your medical care, long-term care insurance reimburses for the cost of home health aides, adult daycare, assisted living, and nursing home stays.  Coverage should be tailored to your personal needs and financial situation, so it’s a good idea to discuss your options with your insurance professional.

Should you buy long-term care insurance?

Statistically speaking, 3 out of 5 people will need long-term care at some point in their lifetime. It may be for a few weeks after a surgery or injury, or for many years due to diseases, such as Alzheimer’s or Parkinson’s.

Long-term care services are expensive and can be a strain on your financial plan. If you have retirement savings and other assets in addition to Social Security, you may want to consider a strategy to protect those assets. Long-term care insurance protects your assets in the event you need assistance performing the activities of daily living.

When should I buy long-term care insurance?

Consider purchasing it before you are older and more at risk for medical conditions that may prevent you from obtaining coverage.  Premiums are based on age, so you should consider purchasing insurance when you are younger because the premiums are lower.

If you already have a medical condition that may result in your needing long-term care, such as cancer, diabetes, or heart disease, you may be required to pay more for long-term care insurance.

How much does long-term care insurance cost?

Long-term care insurance premiums depend on a number of factors, including:

  • Your age
  • Your health status, including tobacco usage
  • The policy’s maximum monthly benefit
  • How long you will receive long-term care benefits
  • How long you will wait before the benefits are paid (elimination period)
  • How your policy keeps up with inflation

A trusted insurance professional can help you create a policy that is right for you and your budget.

What does long-term care insurance cover?

Long-term care insurance reimburses for the cost of an assisted living facility or nursing home.  Most policies provide coverage for home health care services and adult daycare.

Since most people prefer to stay in their home, most policies provide coverage for modifications to make your home livable, such as handrails or ramps.  Many provide benefits for caregiver training and respite care.  Many policies cover the cost of homemaker services such as cooking, cleaning, and grocery shopping.

When choosing a policy, make sure it covers the type of care you want and need. You can compare services, prices, and other coverage with the help of your insurance professional.

What types of long-term care policies are available?

Most long-term care insurance policies are purchased on an individual basis. This means they buy them on their own, not through an employer or as part of a group.

Tax-Qualified Policies – meet certain IRS requirements. These are Reimbursement policies, reimbursing you for long-term care expenses, up to a monthly (or daily) dollar amount. Individuals purchasing these plans may be able to deduct a portion of the annual premium on their income tax return.

Indemnity Policies pay a stated dollar amount per month (or per day) and are not based upon the actual expense incurred. 

Due to changes in the long-term care market and consumer demand, the insurance industry has responded with hybrid plans.

Life Insurance policies combined with a long-term care rider – these policies allow you to access all or a portion of the death benefit to pay long-term care expenses.  These plans are gaining in popularity due to having the life insurance death benefit if you do not need long-term care. 

Survivorship Life Insurance policies allow you to purchase coverage for yourself and your spouse/partner in one contract.  These policies pay the death benefit upon the death of the second spouse (partner) and tend to be less expensive than purchasing two separate policies.

Annuity Contracts allow you to invest assets in a plan that pays a monthly amount if you need long-term care services.  These are useful for individuals that may not be insurable in the traditional long-term care market and have assets to protect.

A trusted insurance adviser can help you understand all aspects of long-term care and help you develop a plan with the right coverage for your needs. If you have planned, saved, and invested for your retirement, the proper long-term care strategy is crucial to protecting your assets.

This content is for informational purposes only and not for the purpose of providing professional, financial, medical, or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem.