Understanding long-term care insurance
If you feel you may need help with day-to-day activities as you age, long-term care insurance may be something to consider. There are three main types, and the one that is best for you will depend on your circumstances.
Long-term care services may include assistance with daily activities that may become more challenging with age or some health conditions, such as eating, bathing, or dressing.
Long-term care insurance plans can help cover the costs of these services, which may be particularly beneficial for individuals with chronic health conditions or disabilities.
More than half of older adults age 65 and over will require some kind of long-term care, and long-term health insurance may help. These plans differ from regular health insurance plans in that they help cover a person’s long-term care needs by offering specialized support and services.
Long-term care plans typically include coverage for custodial care in various settings, such as at-home, in a community setting, or a care facility. Custodial care may include helping people:
Long-term care plans can reimburse a person with a daily amount for the services they receive, and depending on their particular plan, this may include benefits for:
Individuals are required to pay a monthly premium for long-term care insurance, but the amount varies by plan type, plan provider, and the level of coverage required.
This option solely provides coverage for many long-term care services, including assistance with
Plans generally cover ADLs in a person’s home, but may often also include care they receive in a nursing home or assisted living facility.
Traditional plans typically have set periods, which can range from a specific number of years to a lifetime, with longer plans often having higher monthly premiums. Some plans also have waiting periods, known as elimination periods. An elimination period is a specified number of days that a person must wait before their plan begins to cover services.
Plans usually have a daily or monthly maximum limit, which is the most the insurance will pay for services. Some plans may also include inflation protection, which means that the benefit amounts will keep up with rising service costs.
Traditional plans enable individuals to select the level of coverage that best suits their personal and financial circumstances.
If an individual has an existing insurance policy, such as life insurance, they may be able to add a rider to it. Adding a rider allows them to keep your existing plan while adding long-term care benefits to the coverage. This usually results in increased premiums.
As with stand-alone long-term care insurance, benefits will begin when a person is unable to perform a specific number of ADLs.
If an individual has a life insurance plan and adds a long-term care insurance rider, they may be able to use some of their final settlement amount toward the cost of long-term care services. If they do not need the long-term care option, their plan beneficiaries will receive the full original benefit amount following their passing.
This is similar to a long-term care insurance rider, in that it is a benefit attached to another insurance plan. However, a linked-benefit plan is a stand-alone plan that incorporates life insurance and long-term care benefits from the time a person purchases the plan.
If a person does not use all of their long-term care benefit, their beneficiaries may be eligible to receive some of the remaining amount. Plans may also include a small benefit amount that is paid to beneficiaries if an individual passes away.
It’s important not to wait too long before getting long-term care insurance. Insurance is there to help in times of need, but if a person is already sick or receiving care, they may have difficulty purchasing an insurance plan.
This is because some insurance companies use medical underwriting to decide whether to offer a person a plan, whether it will exclude specific health conditions, and how much it will charge in premiums.
Based on 2023 data from the American Association for Long-Term Care Insurance, the average long-term care insurance cost for a single, healthy 55-year-old male was $900 per year for a $165,000 plan.
The annual cost for a single, healthy 55-year-old female was $1,500 for a $165,000 plan.
Each state has its own insurance regulations and laws. People can contact their state’s insurance department for further information about long-term care insurance and for any other state-specific insurance information.
Individuals who anticipate the need for long-term custodial care in the future should consider purchasing long-term care insurance as soon as possible to ensure they receive the best benefits at the most affordable rate.
There are various options to consider, including traditional or stand-alone plans, riders, or separate benefits added to an existing insurance plan.
If a person needs help or advice related to insurance, their state insurance department can help.