Long-Term Care Insurance - Basic Guide to How Policies Can Benefit Families and Finances

We all have memories of our parents when we were kids—strong, capable, and always looking out for us. But as time went on, there was a shift: they became a little more fragile, and suddenly, we found ourselves watching out for them.

It's hard to pinpoint the exact moment that happens, but it does. Eventually, the roles reverse, and their need for help and assistance becomes very real.

Now, consider your own aging. Yes, you, too, get older every day. You might have noticed that in the bathroom mirror this morning. As you grow older, do you want your children to be just family, or do you want them to be entirely responsible for your daily needs?

Planning now makes a lot of sense for many people, and Long-Term Care Insurance benefits help fund that plan. A plan that includes an LTC policy will help preserve that family bond, ensuring your children don't have to shoulder the emotional and physical burden of caregiving. It's about making sure they can focus on being your family—not your caregivers.

Nobody Wants a Nursing Home

More Americans today are impacted by rising long-term care costs and the related burdens that are placed on loved ones. You might think you will never need to go to a nursing home, and you are probably right -- but most long-term care is provided in your home, adult day care centers, and assisted living. Long-term care is not about nursing homes.

If you're very wealthy, you can cover long-term care costs out-of-pocket and avoid a nursing home (unless you really need to be there), but it may not be the most financially efficient choice, depending on how your assets are structured. Extended care expenses can have significant tax implications and erode your estate, especially if you require care for an extended period of time.

On the other hand, health insurance, including Medicare, only covers short-term skilled care, leaving long-term services uncovered. For those with limited resources, qualifying for Medicaid may be an option to access long-term care benefits, although Medicaid has strict income and asset requirements.

That leaves only a few other options, including Long-Term Care Insurance, your personal income and assets, or your family to act as caregivers. You certainly don't want to burden your loved ones to be caregivers, and self-funding professional care adversely impacts your lifestyle and legacy.

LTC Insurance has become very popular as an option for paying for quality long-term care services without adversely impacting your income and assets or burdening those you love.

Who Needs Long-Term Care?

You need long-term care services when you need help with daily living activities or supervision due to dementia.

Activities of daily living (ADLs) include hands-on or standby help with daily tasks we take for granted. These six primary ADLs are:

• Bathing
• Continence (including personal hygiene)
• Dressing
• Eating
• Toileting (including personal hygiene)
• Transferring

Instrumental activities of daily living (IADLs) are the skills required to navigate life. They include:

• Shopping
• Cooking
• Cleaning
• Meal prep
• Taking medications
• Paying bills
• Laundry

You may need long-term care services for a variety of reasons, including chronic illness, accidents, mobility problems, dementia, and frailty. That is right ... you could be healthy but just old and frail and need help with ADLs and IADLs.

You may require supervision and other assistance when you suffer from a decline in your memory. Some individuals with cognitive decline may experience a variety of symptoms, including:

• Memory loss
• Diminished reasoning or problem-solving skills
• Emotional instability and irritability
• Impaired judgment
• Word-finding difficulties 
• Wandering
• Loss of balance 
• Mobility issues
• Hallucinations, delusions, or paranoia

While long-term care services are commonly associated with older adults, younger individuals can also require care due to conditions such as multiple sclerosis (MS), Parkinson's disease, strokes, accidents, or cancer. Early-onset Alzheimer's or dementia, though less common, can also create a need for long-term care.

While dementia is primarily associated with older adults, a small percentage of cases occur in individuals under the age of 60 - often referred to as early-onset dementia.

Estimates vary, but studies suggest that approximately 5-10% of all dementia cases occur in individuals under 60.

How Does Long-Term Care Insurance Work?

Long-Term Care Insurance policies work very similarly because of federal regulation. Generally, you should only consider an LTC policy that meets federal guidelines under Section 7702(b) of federal code.

• What are Long-Term Care Insurance Regulations? How Do They Protect Policyholders?

If you have questions about pre-existing health problems, consider short-term cash indemnity policies. These policies pay cash over a short period of time but have relaxed underwriting rules. They have become popular with some insurance agents, but experts recommend only considering one if you have questionable health, are over age 75, or are adding to an existing qualified policy.

• Don't Be Fooled by the Name - New Policy Type Could Be Valuable Answer for Long-Term Care Expenses for Some People

LTC Insurance policies typically provide coverage based on a set daily, weekly, or monthly benefit amount to help pay for care, whether it's in-home assistance, adult day care centers, assisted living or memory care facilities, or nursing homes.

You and a qualified Long-Term Care Insurance specialist will decide the benefit levels since LTC Insurance is custom-designed. Start by using the LTC News Cost of Care Calculator and see the current and projected cost of long-term care services where you live - LTC News Cost of Care Calculator -Find Cost Where You Live.

Every insurance company has its own underwriting rules. An LTC Insurance specialist will ask you detailed health questions to narrow down which company might be the best option based on your age and health.

Then, you and the specialist will decide whether a traditional LTC Insurance policy (including partnership-certified long-term care policies) or a hybrid one is best. Hybrid policies combine life insurance or annuities with a qualified rider for long-term care. Hybrid policies will cost you more, but the combination of life and long-term care can be attractive to some people.

• Types of Long-Term Care Insurance Policies - Which is Best for You?

Now, you will design the benefits of your LTC Insurance policy.

EXAMPLE: You might decide to cover up to $4000 a month for home care and other services (like adult day care, assisted living, etc.). Unless the policy pays the entire benefit in cash, the policy pays up to the maximum you have available based on bills the insurance company receives. If you don't need the full amount, the remaining stays in the policy and grows with inflation (if you have an inflation rider)

You will likely include inflation benefits, so your benefits, not your premium, will increase over time. There are LTC policies that only give you options to buy more insurance. Generally, experts say to avoid that type of option since the premiums will keep increasing.

Two insurance companies offer unlimited long-term care benefits. Otherwise, you will have a benefit account, a pool of money that can grow over time with inflation. While some companies express this as a benefit period, it is not about time but the amount of money you are using over time.

EXAMPLE: You select an initial pool of money worth $250,000 with 3% compound inflation. Your policy benefits would increase over time:

How Much Does LTC Insurance Cost?

All of this sounds great, but you must be able to afford the policy. Depending on what you read, you might think Long-Term Care Insurance is too expensive. The truth is an LTC policy is affordable.

LTC News did a comprehensive study of what today's Long-Term Care Insurance actually costs. Premiums vary dramatically between insurance companies. Your age, health, gender, and other factors will also impact the premium.

• How Much Does Long-Term Care Insurance Cost at My Age?

Example: Approximate Monthly Premium with A 3% Compound Inflation Rider at Age 55

Hybrids - How Much Do They Cost?

There are fewer options with hybrid long-term care policies but be sure the policy you are considering meets federal guidelines. Otherwise, it is not a Long-Term Care Insurance policy, and you won't have the regulatory benefit triggers, consumer protections, and tax incentives.

Three insurance companies offer cash benefits. Two companies have shared spousal benefits with a second-to-die-death benefit. One company has unlimited benefits. A LTC Insurance specialist will help you navigate the options.

You can pay premiums with one single premium or pay the premium over five years, ten years, twenty years, or even for life. Premiums vary depending on the policy design, age, and inflation factors.

Example: A $100,000 single premium could provide a 55-year-old couple with almost $4000 a month each with a long-term care benefit account of just over $300,000, growing 3% compounded, and a second-to-die death benefit of a little over $140,000.

LTC News Educate Yourself Feature

LTC News can help you educate yourself before or after you speak with an LTC Insurance specialist. There are tremendous tools and resources available on LTC News that will make finding the right plan easier.

Start your education: Plan Like a Long-Term Care Insurance Expert.

Find a qualified LTC Insurance specialist: Find a Qualified LTC Insurance Specialist.

Ready to apply, how does that work: How To Apply For Long-Term Care Insurance.

The Take-Away

The ideal time to apply is when you are younger and healthier. There are many options to reduce the future costs and burdens of aging and the rising cost of long-term care services.

Your current health allows you to acquire an LTC policy. Most people get coverage in their 40s or 50s, but affordable options can be found in their 60s and older, depending on their health.

• How Can I Apply for Long-Term Care Insurance?

When you have a plan, you will avoid a family crisis decades from now. Don't delay thinking about the consequences of aging.