What Is Long-Term Care Insurance?

As healthcare costs continue to grow, along with the increasing likelihood of needing care as you get older, long-term care insurance can help provide valuable peace of mind and financial security for you and your family. 

Why you may need long-term care insurance

According to the Department of Health & Human Services:

• Almost 70% of seniors who are age 65 will need some form of long-term care support. The duration and level of care will vary from person to person.
• Women are expected to need care for longer than man (3.7 years vs 2.2 years, respectively).

Not many people are aware that long-term care services are generally not covered by traditional health insurance and that Medicaid and Medicare (if you qualify) only provide limited coverage for specific circumstances.

This is where long-term care insurance can step in to help cover the gaps in coverage, paying for expenses associated with long-term care support. A key goal of long-term care insurance is to help you maintain your independence and quality of life as you age.

Here are some additional potential benefits of long-term care insurance:

• Financial safety net: Long-term care services can be costly. Without a policy in place to help cover expenses, you run the risk of depleting your savings. Long-term care insurance can provide a critical safety net to support your healthcare needs as you get older.
• More flexibility: With long-term care insurance, you can choose the type of services you receive and where you receive it, giving you more control over your care.
• Peace of mind: Knowing that you have a financial safety net in place can provide valuable peace of mind for you and your loved ones.

Types of long-term care insurance

There are several types of long-term care insurance policies available, each with its own features, benefits, costs, and terms. When shopping for plans, pay close attention to details like benefit amount, benefit period, elimination period (aka, waiting period), and the policy premium.

Two common types of policies you’ll come across are a 1) traditional policy and 2) hybrid policy.

• Traditional. This type of policy provides a fixed daily or monthly benefit amount for long-term care services, up to a lifetime maximum.
• Hybrid. This type of policy usually combines long-term care insurance with life insurance, providing a death benefit (cash payout) if you don't need long-term care.

Insurance companies may also offer different types of policies or riders that can help address specific needs or concerns.

Be aware that the duration and level of benefits will vary from plan to plan. Some may provide short-term coverage in which they pay for your costs for two to five years, while there are policies that may pay for your care for as long as you live.

If you need help figuring out what type of coverage or policy is right for you, talk to your financial planner or an insurance expert who can guide you through the decision-making process.

Eligibility considerations

Not everyone may qualify for a long-term care insurance policy. Eligibility criteria and potential exclusions vary depending on the insurance provider and policy.

Many individual policies require some type of medical underwriting. This is where insurance companies assess your age, health status, medical history, and daily habits to determine your eligibility for coverage.

Generally speaking, you may not be able to buy a policy if you’re in poor health or if you’re already receiving long-term care support.

It's a good idea to review the specific eligibility criteria and policy terms with an insurance provider to understand what is covered and what may be excluded.

What is the cost of long-term care insurance?

According to the National Council on Aging:

Keep in mind that these are only sample estimates. Actual premiums can vary significantly based on several factors such as your age, where you live, insurance provider, and policy terms. 

• Age. Generally, the younger you are when you purchase long-term care insurance, the lower your premiums will be.
• Health. Your health at the time of application can significantly impact your premiums or even your eligibility for coverage. Pre-existing medical conditions may result in higher premiums or exclusions from coverage.
• Policy features. The specific features of your policy, such as the daily benefit amount, benefit period, and elimination period, can also affect your premiums. More comprehensive coverage typically costs more.
• Inflation protection. Some policies offer inflation protection, which can increase your premiums but helps ensure that your benefits keep pace with rising long-term care costs.

Planning for long-term care

Long-term care insurance is an important consideration in retirement planning, especially for individuals who may need specific healthcare services or support as they get older.

That being said, be aware that buying long-term care insurance may not be right for everyone. Premiums can be expensive, and depending on your financial situation and retirement goals, it may not make sense to purchase a policy. This is why consulting a financial advisor can be a good idea if you’re exploring your options.

As you think about your overall long-term care planning strategy, consider the following tips:

• Assess your needs: Consider your health, family history, and financial situation to determine your likelihood of needing long-term care.
• Understand your insurance options: See which type of policy, plan features, as well as benefit amount/period may make the most sense for your needs, budget, and financial goals.
• Seek professional guidance: If you have questions about whether long-term care insurance is right for you, talk to your financial advisor or an insurance specialist. They can help you navigate your policy options and create a personalized plan.