Long-term care insurance is designed to cover your care if you need it. You must qualify for long-term care coverage before you can purchase a policy.
It is hard to imagine that you might be unable to perform the same daily activities you do now. We must plan now for a long life expectancy and determine how we will cover the increased expenses of care rather than wait for the inevitable.
If you don’t plan for long-term care, you could end up depleting your retirement savings.
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What is long-term care insurance?
Long-term care insurance covers various services for people with chronic illnesses and disabilities. It can cover the costs of the care you need to treat the condition. Long-term care benefits will vary, with some factors being:
- Coverage options
- Benefit limits including lifetime maximum
- Premiums
Also, there is no guarantee that premiums won’t increase. Therefore, reviewing the insurance company’s history of increases is essential before purchasing a policy.
What does LTC cover and why is it important?
By the age of 65, the average adult has a 70% chance of needing long-term care in the future.
While LTC coverage varies by the company and policy you purchase, long-term care services and benefits may include:
- Assisted living facility or nursing home care
- Care in your home so you don’t have to relocate
- Adult day care and custodial care
Some LTC policies offer lifetime benefits. However, because they cost more, some people purchase policies with a five-year benefit.
It is essential to read the fine print and consult a qualified advisor before purchasing a policy. They can provide you with options and costs for different policies and may be able to determine whether you qualify for coverage.
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Why purchase long-term care insurance?
There are various reasons people buy long-term care insurance. Common reasons people purchase long-term care insurance include:
- Filling the gap between the cost of long-term care insurance coverage and what you would need to pay if you need long-term care.
- Protecting you and your family’s savings and investments.
- Providing flexibility in your options.
- Receiving services from a qualified practitioner
- Providing financial peace of mind for you and your family
Medicare Coverage
Some people believe Medicare will cover the cost of care. Medicare may cover short-term home stays, but the coverage is minimal. Medicaid may provide some relief for low-income individuals with little or no savings.
First, determine what benefit you may need and how much you can afford. 
Some of the riders you will need to consider include:
- The elimination period – the number of days you wait until your policy begins to pay a benefit
- An inflation rider – to keep pace with inflation.
- Benefit – how much the policy will pay you if you need care
- Types of benefits – policies that offer home health care often cost more
Next, select a policy. The insurance company will confirm you are eligible for coverage. The insurer requires that they medically underwrite and approve you.
The process may include a medical exam, online questionnaire, or telephone interview. The insurance company will also review your medical history to determine if you have any pre-existing medical conditions that might exclude you from LTC.
Once they approve your policy, you must wait for a certain period. During this time, you must meet the requirements for policy benefits, which are based on activities such as eating, bathing, and dressing.
The general list of the qualifying activities of daily living are:
- Bathing
- Dressing
- Eating
- Functional mobility or transferring (moving from one place to another in a daily routine)
- Personal hygiene
- Toileting
- Cognitive impairment including dementia and Alzheimer’s
When a policyholder can no longer perform at least two ADLs, they qualify to receive policy benefits. Once the insured files a claim, the insurance company must review the case and approve the care plan.
If the insured has dementia, the benefit start date will be different.
What is the cost of long-term care insurance?
Like health insurance, the cost of long-term care insurance will depend on several items. These items include:
- The insurance company – each separate provider will have its policy and coverage offerings. Be sure to consult with a qualified advisor to determine the best options.
- Amount of coverage
- Age and health status
- Gender
- Marital status – married partners can receive lower premiums when applying together.
You can compare those annual premiums with the exorbitant cost of potential long-term care costs.
What is a hybrid policy?
Insurance companies created hybrid LTC policies for people who want to keep their money if they don’t need care. Hybrid policies generally combine LTC coverage with a life insurance policy. If you do not use the LTC, some of the premiums you paid are available to you or your heirs.
Hybrid policies may offer a guarantee as opposed to traditional LTC policies. If you pay premiums for a certain period, the insurance company guarantees the death benefit.
One disadvantage of hybrid policies is higher premiums. Policyholders of hybrid coverage generally pay premiums over a shorter period, increasing the annual amounts.
Another option with a hybrid policy is to pay a lump sum amount instead of a monthly premium.
Because a variety of care options exist, we recommend that you consult with a qualified advisor.
Conclusion – “What is Long-Term Care Insurance”
There are a variety of decisions and options to consider when purchasing coverage. You must review your options and read the disclosures to make an informed decision.
Therefore, it is also advisable to consult with a qualified advisor. They are uniquely qualified to review your options and determine the best action. If you work with an advisor, confirm they can offer you the best coverage for your situation. Some advisors can only offer products from a specific company, which may not be your best option.
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