How Does Long-Term Care Insurance Differ From Other Types Of Insurance?

For many of us, health insurance is our introduction to the insurance industry. When it comes to our health, we may expect health insurance to cover any health-related expenses. However, it's important to know that health insurance doesn't cover long-term health care expenses outside certain skilled services.

Long-term care (LTC) is a type of care for those who need help with daily living expected to last longer than 90 days. Health insurance and other types of insurance don't cover long-term care services.

LTC News seeks to provide insight into long-term health care and Long-Term Care Insurance. Our goal is to make information more accessible so individuals like you can make well-informed decisions. 

So how exactly does Long-Term Care Insurance differ from other types of insurance and health care programs? How is it similar? Let's compare Long-Term Care Insurance to a few commonly confused types of insurance.

In this article, we'll compare Long-Term Care Insurance with the following types of insurance and government programs:

• Health insurance
• Medicare
• Medicaid
• Life insurance
• Disability insurance
• Short-term care insurance

How Does the Type Of Insurance Affect Coverage?

Different types of insurance cover different services. And when it comes to long-term health care, it's vital to have the appropriate type of coverage before you need care.

While long-term care and health care are related, they're not the same. More importantly, comprehensive long-term health care and health care are covered by different types of insurance. 

Health care is medical care with the goal of improving and/or returning a patient to a previous level of health. This care can involve but is not limited to:

• Preventative health measures
• Diagnosing conditions
• Treating conditions
• Surgeries
• Medications
• Lab work
• Doctor and hospital visits

Health care also encompasses many other fields. This includes, but isn't limited to, dentistry, pharmacy, nursing, optometry, audiology, psychology, therapy, and athletic training. 

On the other hand, long-term health care usually comes after medical or health care. Long-term health care is a prolonged need for assistance with daily activities that last longer than 90 days. Much of long-term health care is custodial. 

The only overlap between long-term care and health care is skilled care. We'll discuss skilled and custodial care in the next section.

What Is Long-Term Care Insurance?

Before we compare Long-Term Care Insurance to other types of insurance, we should define it. Long-Term Care Insurance provides comprehensive coverage for long-term health care services. This includes both long-term care facilities and in-home care. 

Long-Term Care Insurance covers facilities such as:

• Nursing homes
• Adult day care centers
• Memory care
• Assisted living facilities

Many services make up long-term health care. These services are designed to meet health or personal care needs for long periods of time. Health and personal care needs may include help with daily living or supervision for cognitive decline. 

RELATED:What Is Long-Term Care Insurance & What Does It Cover?

What Is Custodial Care?

Custodial care is one of the most significant aspects of long-term health care. In fact, custodial care sets long-term health care apart from medical health care.

Custodial care is non-medical help with daily living. Custodial care includes assistance with activities of daily living (ADLs) such as:

• Bathing
• Continence
• Dressing
• Eating
• Toileting
• Transferring

Custodial care also includes help with instrumental activities of daily living (IADLs). IADLs are related to ADLs, but they’re a little bit different. 

ADLs focus on tasks that are key to basic hygiene and movement. IADLs focus on daily tasks that are essential to living in society. Instrumental activities of daily living can include but aren’t limited to:

• Cooking 
• Cleaning
• Transportation
• Managing finances

What Is Skilled Care?

A less prominent part of long-term health care is skilled care. Only licensed nurses, physical therapists, or skilled professionals can provide skilled care. Here are a few types of skilled care:

• Physical therapy
• Administering medications
• Monitoring patients' conditions

Long-Term Care Insurance vs. Private Health Insurance

As we discussed, health insurance doesn't cover most long-term health care services. You need separate policies for health care and long-term health care. If you don't have proper coverage for either type of care, you or your family will be responsible for care costs. 

Skilled Care vs. Custodial Care

Many private health insurances cover up to 100 days of skilled nursing per diagnosis. However, this can vary by company and policy. 

Health insurance does not cover an essential part of long-term care: custodial care. Many long-term care patients need custodial care without skilled services within their first 100 days of care. 

During this time, family members and friends often help with custodial care. If a loved one isn't available to help and you don't have Long-Term Care Insurance, you may have to pay for professional care out-of-pocket. 

After 100 consecutive days, most private health insurance policies stop covering skilled care. Once health insurance coverage ends, patients are responsible for covering long-term care costs. In that case, patients usually rely on the following:

• Long-Term Care Insurance 
• Help from family caregivers
• Government programs (for those with little or no income who qualify)
• Self-funding, or paying for care out of pocket

How Pre-Existing Conditions & Health Affect Coverage

Underwriting is another huge difference between Long-Term Care Insurance and health insurance. Underwriting is a process used to determine whether applicants can start new policies. 

Long-Term Care Insurance is medically underwritten. That means your age and health impact your ability to qualify for coverage. Long-Term Care Insurance coverage is not guaranteed to every applicant. 

Health insurance is not medically underwritten. Under the Affordable Care Act and many employer plans, you can get coverage regardless of pre-existing conditions. However, health insurance does not cover most long-term health care costs. 

If you're interested in LTC Insurance, try to get coverage before you need care or have any health conditions. You can't start a new Long-Term Care Insurance policy if you already need care. 

RELATED:When Is the Best Time To Apply For Long-Term Care Insurance?

Long-Term Care Insurance vs. Medicare

Medicare is a tax-supported health program primarily for those 65 and older. Medicare can also cover those with disabilities or specific conditions at younger ages. We pay taxes our entire working lives for this entitlement program. 

Some individuals may assume Medicare covers all health-related care and services. However, Medicare only covers medical health care expenses. Medicare does not cover custodial care or most other long-term health care services. 

On its own, Medicare covers up to 20 days of skilled nursing at no extra cost. In some cases, Medicare covers up to 100 days of skilled care with a potential copay each day after day 20. This copay amount changes each year. 

Many people have Medicare supplement insurance, also known as Medigap. Medicare supplements are extensions that cover expenses like copays. Medicare and Medicare supplements do not cover skilled long-term care beyond 100 days. These programs never cover custodial care. 

There's also another separate Medicare program called the Medicare Advantage program. This program may cover more services than traditional Medicare and Medicare supplements. These services can include nursing home care, respite, and home health care. However, Medicare Advantage does not focus on providing ongoing custodial long-term health care. 

Long-Term Care Insurance vs. Medicaid

Medicaid is a federally funded assistance program. This program helps low-income individuals access various types of health care. Medicaid includes coverage for long-term health care. 

Individuals must meet income, assets, and home equity limits to qualify for Medicaid. This may involve spending down savings and assets to meet the requirements. You cannot give away money, assets, or valuables to spend down and meet requirements. 

In other words, you can't meet the requirements by transferring wealth to friends or family. Spend-down criteria vary by state, location, and year. The Centers for Medicare and Medicaid Services outline Medicaid requirements and eligibility on their website. 

Long-Term Care Insurance and Medicaid are very different services. They may both cover long-term health care, but they're geared toward different people. Long-Term Care Insurance is a paid service to cover long-term health care expenses. 

Medicaid is a program for low-income individuals with no other options. Medicaid coverage may not be as flexible as Long-Term Care Insurance.

Long-Term Care Insurance vs. Life Insurance

Life insurance policies pay a death benefit to beneficiaries only after a policyholder passes away. These policies act as safety nets in the event of death. 

Some life insurance policies allow partial access to the death benefit if the policyholder is terminally ill. This is known as the Accelerated Death Benefit (ADB). If you have a terminal illness or life expectancy between 6 months and 2 years, the policy will pay 50–80 percent of the life insurance amount. 

Most life insurance policies don’t provide benefits while policyholders are alive. Most importantly, standalone life insurance does not cover long-term care services or expenses. 

However, some policies can combine life insurance and Long-Term Care Insurance coverage. We’ll discuss these in the next section.

Hybrid Policies

Some policies combine both life and LTC Insurance into one policy called a hybrid policy. Hybrid policies cover long-term care services and pay out a death benefit to beneficiaries. 

In some cases, individuals may hear about hybrid policies and assume all life insurance policies cover long-term health care. It’s important to remember that general life insurance policies don’t cover long-term care services. Only hybrid policies offer this dual coverage.

LTC News has resources on hybrid policies and other types of LTC Insurance. This article explains what hybrid policies are and how they compare to traditional Long-Term Care Insurance. 

Long-Term Care Insurance vs. Disability Insurance

As we've discussed, Long-Term Care Insurance was created to provide comprehensive coverage for long-term health care. On the other hand, disability insurance covers individuals who can't work due to sickness or disability.

There are two types of disability benefits. One is private disability insurance, which is usually available through employers. 

The second type is Supplemental Security Income (SSI), or social security disability. SSI covers individuals who have a condition predicted to result in death. This condition must prevent the individual from working for 12 months or more. For more information on SSI, visit this website that outlines government benefits.

Neither SSI nor private disability insurance covers long-term health care. In fact, disability insurance was designed to be supplemental income. Most disability policies pay a percentage of income (often 60%) through age 65, but this can vary.

This supplemental income could be used to cover long-term health care expenses. However, that isn't the goal of disability insurance. 

The goal of disability insurance is to help disabled individuals cover living costs while they're unable to work. It doesn't help directly with long-term care services or expenses.

Plus, many people who need long-term health care have long since retired and are no longer working. Disability insurance only helps those who cannot work, not those who have retired. 

Regardless of retirement, most policies end at age 65. You'll likely need help with long-term health care services after this age. In contrast, Long-Term Care Insurance covers all long-term health care expenses. It doesn't provide any extra income. 

Disability insurance and Long-Term Care Insurance both help people with disabilities and illnesses. However, there are no other overlaps between the two. These insurances support people in vastly different ways. 

Long-Term Care Insurance vs. Short-Term Care Insurance

Short-term care insurance covers custodial and skilled care for a shorter period of time. 

Short-term care insurance isn't the same as LTC Insurance. Short-term care insurance is less comprehensive than Long-Term Care Insurance. Although both cover similar long-term health care services and facilities.

The biggest difference between the two is the policy length. Short-term care insurance typically covers up to one year of in-home care and one year of institutional care. Some short-term policies cover both in-home and facility care, and some may only cover one or the other. 

Long-Term Care Insurance doesn't have a time limit. LTC Insurance policies don't usually split coverage between in-home and facility care either. Only short-term care insurance policies have time limits and coverage constraints. 

Short-term care insurance has more lenient underwriting criteria than LTC Insurance. This can make it easier to get a short-term policy. However, these lenient rules come with a trade-off.

Short-term care insurance doesn't meet the federal guidelines that Long-Term Care Insurance must meet. This could mean fewer consumer protections. However, short-term policies do have the same benefit triggers and tax-free benefits as LTC Insurance. 

Short-term care insurance isn't a replacement for a Long-Term Care Insurance policy. However, short-term care insurance may be a solution for those seeking to supplement their LTC Insurance policy. It may be an even greater help to individuals who cannot qualify for LTC Insurance.

Understanding Long-Term Care Insurance 

Long-Term Care Insurance provides comprehensive coverage of long-term health care services and facilities. This includes both custodial and skilled care. 

Other types of insurance policies don’t cover long-term health care services. Most importantly, health insurance (including Medicare and supplements) doesn’t cover long-term care services. 

This works in reverse as well. Traditional Long-Term Care Insurance policies don’t cover anything besides long-term health care services. The only exception is hybrid policies, which combine life and Long-Term Care Insurance into one.

As you continue to learn more about Long-Term Care Insurance, the following resources may be able to help:

• Types Of Long-Term Care Insurance Policies & Which Is Best For You? – This article explains the different types of comprehensive Long-Term Care Insurance policies. It breaks down the pros and cons of each policy and why one might work better for you.