The term Long-Term Care Insurance comes up more often as we age. But what exactly is Long-Term Care Insurance? And what does Long-Term Care Insurance cover?
LTC News consults with the top Long-Term Care Insurance experts in the industry. These experts include Long-Term Care Insurance specialists, actuaries, insurance executives, and other healthcare professionals. They provide insight into Long-Term Care Insurance and any changes it may undergo.
In the past, Long-Term Care Insurance only covered facilities like nursing homes. Today, LTC Insurance can cover many more long-term care services, such as in-home care.
This article will discuss what Long-Term Care Insurance is, what it covers, and how it works. We’ll also walk through the differences between long-term care and health care.
What Is Long-Term Care Insurance?
Simply put, Long-Term Care Insurance is a type of insurance that covers long-term care services. But you may also be wondering: What is long-term care? And what exactly are long-term care services?
What Is Long-Term Care?
Long-term care is legally defined as care that is expected to last for at least 90 days due to illness, accident, disability, or aging. Long-term care services come in many different forms. Individuals can receive care in facilities or at home.
Most long-term care is custodial. Custodial care is non-medical help with activities of daily living (ADLs) or supervision due to cognitive decline.
ADLs include but are not limited to hands-on and/or stand-by assistance with:
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Bathing
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Continence
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Dressing
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Eating
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Toileting
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Transferring
Long-term care also includes skilled care from a skilled nurse. Skilled care usually involves monitoring vitals, administering medications, and various types of therapy.
Generally, the first 100 days of skilled care are paid for by your health insurance. If skilled care continues after those first 100 days, then your Long-Term Care Insurance policy will cover it.
How Does Long-Term Care Insurance Differ from Health Insurance?
Many people may confuse Long-Term Care Insurance with health insurance. It’s easy to see where this misconception comes from. Both insurances offer health-related care to individuals in need.
But Long-Term Care Insurance and health insurance are quite different. They cover different types of care without much overlap.
Health insurance covers medical care and procedures. This care attempts to return patients to a previous or better state of health. It does not cover custodial care.
Long-Term Care Insurance covers skilled nursing and custodial care. This care helps people live their day-to-day lives. Custodial care isn’t necessarily medical. It usually involves helping people with activities of daily living. It may also include supervision due to memory loss or cognitive decline.
Individuals need separate policies if they want both health and long-term care coverage. Health insurance, including Medicare and supplements, will not pay for any custodial long-term care services.
What Does Long-Term Care Insurance Cover?
Long-Term Care Insurance offers comprehensive coverage for long-term care services. Almost all policies are comprehensive today.
These policies can cover anything from in-home care to extended nursing home stays. They offer flexible coverage to meet all policyholder's needs.
Comprehensive Long-Term Care Insurance also covers:
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Adult day care
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In-home care
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Homemaker & companionship services
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Assisted living facilities
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Memory care facilities
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Nursing home care
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Hospice care
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Skilled & semi-skilled care
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Physical, speech, and occupational therapy
Policyholders can customize their plans to match their needs. Many companies also offer riders and add-ons. These add-ons provide additional desirable benefits for an extra cost.
Some insurers also offer non-traditional policies, such as hybrid policies. We’ll discuss hybrid policies later in this article.
How Does Long-Term Care Insurance Work?
Most people know that Long-Term Care Insurance helps pay for long-term care services and facilities. But how exactly does it work?
In this section, we’ll walk through LTC Insurance benefits—which help cover a policyholder’s long-term care—and how policies pay for care.
Choosing The Benefits For Your Long-Term Care Insurance Policy
When individuals first purchase a policy, they get to choose the amount of benefits they want within their policy. These benefits are expressed as an initial pool of money, also known as a benefit account.
Policyholders then get to decide whether they want a daily or monthly benefit. A daily benefit limits how much your policy can pay for care in one day. The daily benefit pays for care daily.
A monthly benefit works similarly. It limits how much your policy can pay for care in a single month. The monthly benefit pays for care every month.
In many cases, it’s best to choose a monthly benefit. Daily benefits could leave you with out-of-pocket expenses one day and too much coverage the next.
For example, your daily benefit may cover in-home care each day. But adding a physical therapy appointment may exceed your daily benefit limit. If it does, you’re responsible for paying the out-of-pocket costs.
Monthly benefits cover your expenses from the month as a whole. In general, you don’t have to be concerned about your care schedule with a monthly benefit as you might be with a daily benefit.
Benefit Periods
Policyholders also get to choose a minimum benefit period. Benefit periods are the minimum amount of time you will receive benefits. Most people choose somewhere between one and five years.
However, your policy does not end after those years. Any unused money stays in your account, extending your benefit period. Your policy will remain effective until you use all of the benefits within your benefit account, regardless of how many years you choose within your policy.
For example, let’s say your monthly benefit is $2,000, but for one month, you only use $1,500. The remaining $500 doesn’t get added to the following monthly benefit. Instead, it increases the minimum amount of time you can access benefits. In other words, it increases your benefit period.
Daily benefits work the same way. Any unused money stays in your benefit account. The extra money does not increase your daily benefit limit for the next day.
It’s also important to note that some companies may not use benefit periods at all. Instead, these companies use mathematical formulas similar to benefit periods to calculate a pool of money.
Occasionally, individuals may choose to have unlimited benefits. Unlimited benefits last a lifetime and can never be exhausted. Only a few companies offer this option, and it’s much more expensive than policies with time limits.
A Long-Term Care Insurance specialist can help you learn more about companies that don’t use benefit periods or that offer unlimited benefits.
Receiving Benefits
Before policyholders can receive benefits for the first time, there’s a one-time waiting period known as an elimination period. Policyholders are responsible for covering their long-term care needs during an elimination period.
An elimination period is the time between qualifying for benefits and receiving benefits. Think of the elimination period as a deductible based on days—not dollars. Elimination periods are once in a lifetime, not once per claim.
Policyholders can choose the length of their elimination period. The longer the elimination period, the more affordable the policy. Zero-day elimination periods are the most expensive option.
Most insurance companies use calendar days to count elimination period days. Some companies may use service days. A service day is a day that you receive long-term care services.
Let’s say you have a 90-day elimination period that uses service days. In this scenario, you’d need to receive care for 90 days before your policy’s benefits would kick in.
Considering that you may only need care three or four days a week, this could take a long time. This is why it’s recommended to use calendar days. If you have to use service days, make sure to choose a low elimination period.
As we mentioned, most traditional health insurances will pay up to 100 days of skilled care. Time covered by health insurance counts towards elimination period days.
Some policyholders may choose a shorter elimination period. Others may use short-term care insurance to cover their custodial care needs. Some individuals may need to pay out-of-pocket or rely on family members for care during the elimination period.
Once the elimination period ends, your Long-Term Care Insurance will pay for long-term care services. The insurer will pay claims until one of the following occurs:
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The policyholder no longer needs care
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The money in their benefit account runs out
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The policyholder passes away
Changing Your Policy’s Benefits
Suppose you want to change or add more benefits to your policy. After your application is approved, insurance companies will usually allow you to make changes within 30 to 60 days.
However, if you want to increase benefits years later, you'll have to go through the underwriting and interviewing process again. These changes will affect your premium and policy as a whole.
There are a few exceptions to this rule. For example, you can always reduce your coverage. Reducing your coverage will reduce your premiums. You don’t have to go through the underwriting process to get approval to reduce coverage.
Another exception is an inflation benefits rider. Inflation benefits are designed to increase the amount of benefits within your policy. This is one of the only ways to easily add benefits to your policy.
Some other companies may have a guaranteed purchase option. These allow you to increase benefits without underwriting as long as you are not receiving benefits at the time.
The cost of a guaranteed purchase option is based on a policyholder’s age, which can make it more expensive to add as you get older. In this case, inflation riders may be a more cost-effective option.
However, policyholders cannot add more benefits to their policies after a serious health event or diagnosis. You cannot add benefits if you’re currently receiving benefits. There’s also usually an age cap. It’s easier to choose more benefits upfront than to change later.
Types Of Long-Term Care Insurance Policies
There are two types of Long-Term Care Insurance. These are traditional and hybrid policies. Both policies provide comprehensive long-term care coverage.
In this section, we’ll break down the differences between traditional and hybrid policies.
Traditional Policies
Traditional Long-Term Care Insurance policies are the most common type of policy. These policies provide coverage for long-term care services and facilities.
Traditional policies are the most affordable option. They can be a good fit for anyone only looking for long-term health care.
Traditional policies are also the only policy type eligible for partnership programs. These programs provide extra asset protection to Long-Term Care Insurance policies.
Hybrid Policies
Hybrid policies, also known as asset-based, are the other type of Long-Term Care Insurance. Hybrid policies combine life insurance policies with Long-Term Care Insurance.
Many individuals choose hybrid policies because of the death benefit. Some people may worry about never using the Long-Term Care Insurance benefits they pay for.
Hybrid policies offer a solution to this worry. If policyholders have benefits left over when they pass away, their beneficiaries will receive a death benefit. Some companies also offer a death benefit even if someone exhausts their LTC Insurance benefits.
Policyholders typically pay for hybrid policies with one initial payment. There are also options to pay for five, ten, twenty years, or over a policyholder’s lifetime.
Hybrids can cost more than traditional Long-Term Care Insurance. This is because they combine two types of insurance.
Long-Term Care Insurance Regulations
Long-Term Care Insurance is a stable and regulated industry. Every policy is required by law to meet federal regulations. These regulations detail LTC Insurance policies and how they should cover individuals.
Every federally qualified LTC Insurance policy offers comprehensive long-term care. These regulations ensure access to benefits as soon as individuals need them. They also prevent companies from canceling policies.
The Long-Term Care Insurance industry also regulates premium prices and increases. LTC Insurance companies cannot raise a policyholder’s individual premium because of changes in health, claims, or increasing age.
Your premium will stay the same regardless of how many benefits you use or how often you need care. Premiums are built to remain stable.
Exploring Long-Term Care Insurance
Modern Long-Term Care Insurance provides people with flexible care options. Every federally qualified policy offers comprehensive coverage. They cover in-home care and long-term care facilities.
Policyholders can customize their policies to match their needs and budget. They can choose the benefits they’d like within their policy and how long they’d like them to last.
Pre-existing conditions may prevent you from starting a policy. Health issues can also make premiums more expensive.
This is why LTC Insurance specialists recommend buying coverage before health problems start. Buying earlier in life will allow you to lock in a more affordable premium and ensure you can get care when needed.
LTC News is here to answer the most pressing questions throughout the Long-Term Care Insurance process. We’ve created articles, guides, and glossary entries to help explain this tricky subject.
We’re dedicated to covering all areas of long-term health care. This includes LTC Insurance, long-term care news, aging, caregiving, retirement planning, and other related topics.
Here are a few resources that can help you learn more about Long-Term Care Insurance:
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How Much Does Long-Term Care Insurance Cost? — Knowing how much LTC Insurance could cost you is important. This article breaks down factors affecting LTC Insurance’s cost and even provides hypothetical price breakdowns for multiple age ranges.
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Long-Term Care Insurance Specialists vs. Financial Advisors — Experienced professionals can help you find the best LTC Insurance policies based on your needs. This article compares two types of professionals: LTC Insurance specialists and financial advisors. The article also discusses the type of qualifications a professional needs and questions you can ask to ensure a professional can help you find the best LTC Insurance policy for your needs and preferences.