What Does Long-Term Care Insurance Cover?

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As we age, the likelihood of needing some form of long-term care increases. Investing in a long-term care insurance policy can provide much-needed financial support to help cover these costs. But what exactly is long-term care insurance? What does it cover? If you’re looking for the answers to those questions, you’re in the right place! Here’s everything you need to know about long-term care insurance.

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What is Long-Term Care Insurance?

Long-term care insurance (LTCI) helps pay for the cost of long-term care services. A variety of services fall under the long-term care umbrella, but this type of care benefits those with illnesses, injuries, or disabilities. Services typically included assistance with activities of daily living (ADLs). Additionally, services may include memory care for people with Alzheimer’s disease or dementia.

Long-term care insurance policies are like snowflakes—no two policies are alike! Policies vary widely in terms of coverage, benefits, and premiums. Some common features of these policies include:

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Benefit amount: The maximum amount of money that the policy will pay for long-term care services.
Elimination period: The amount of time that you must be unable to perform daily activities or have a cognitive impairment before the policy will start paying benefits.
Daily or monthly benefit: The amount of money that the policy will pay per day or month for long-term care services.
Length of coverage: The amount of time that the policy will pay for long-term care services. Some policies offer coverage for a specific number of years. Meanwhile, others offer lifetime coverage. Once again, it depends on the policy!
Inflation protection: Whether the policy will increase its benefits over time to keep up with the rising cost of long-term care.

Comprehensive Coverage

Most long-term care insurance policies sold today are comprehensive. This means they typically allow you to use your daily benefit at your discretion and choose the care that best suits your needs. This means that you can choose where you’d like to utilize your benefits. Some of your options include:

Nursing homes: Provide care for individuals who need 24-hour supervision and skilled medical care.
Assisted living facilities: Provide a supportive living environment for individuals who need help with ADLs but do not need 24-hour supervision.
Adult day care facilities: Provides care and supervision for adults in a group setting during the day. Participants can enjoy healthcare services, fun activities, and educational programs in a safe, stimulating environment.
Respite care: Provides temporary relief for caregivers.
Hospice care: Provides specialized care for people with advanced illness and a prognosis of a few months or less to live.
Memory care facilities: Provides specialized care to individuals with memory disorders, such as Alzheimer’s and dementia, who require 24-hour supervision.
Home care: Provides a wide range of healthcare services to individuals within the comfort of their own home.

Additionally, there are two main types of long-term care policies. These include the following:

Traditional Long-Term Care Insurance

This type of policy is specifically designed to cover the expenses of long-term care, such as services provided in a specialized care facility or within your home.

Hybrid Long-Term Care Insurance

Alternatively known as “combo policies” and “linked benefits“, this type of policy combines long-term care benefits with a regular life insurance policy or annuity. In addition to providing benefits for long-term care, these policies may also offer death benefits.

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Who Should Consider Long-Term Care Insurance?

Most people will need long-term care insurance at some point in their life. As a matter of fact, 7 out of 10 Americans aged 65 and older will need long-term care! You may be a good candidate for long-term care if you are:

Over the age of 50.
Have a family history of long-term care needs.
Have a chronic health condition that may increase your risk of needing long-term care.
Want to protect your assets from being depleted by the cost of long-term care.
Want to maintain your independence and quality of life if you do need long-term care.

It’s important to note that long-term care insurance isn’t right for everyone. Before you even buy a policy, consider your needs and budget. If you’re unsure whether it’s right for you, reach out to a financial advisor. They can help you assess your needs and choose the best policy for you!

Types of Services Covered

Long-term care insurance covers a range of services to assist with daily activities. This includes nursing care, physical, occupational or speech therapy, and assistance with personal care such as bathing, dressing, and eating. Additionally, it may cover homemaker services, like light housekeeping, laundry, and meal preparation.

How Can I Choose the Best Policy for Me?

Choosing the right long-term care policy for you is an important decision! If you’re not sure where to begin, always contact a financial advisor or retirement planner for further guidance. However, you can always do your research and get a general idea of what you want. First, consider your needs and family history. Will you need assistance with activities of daily living? Do memory disorders, such as Alzheimer’s or dementia, run in your family? Some other factors to consider include:

Your budget
Your health
Your age
The insurance company you purchase your policy through

Some Additional Tips for Choosing a Policy:

Look for a policy with a long elimination period. A shorter elimination period means higher premiums. Conversely, a longer elimination period will result in lower premiums.
Consider a policy with inflation protection. This one may be especially important in today’s economy! As previously discussed, inflation protection guarantees that your benefits keep up with the rising costs of long-term care. This may be a great way to make sure you get the level of care you deserve, even as circumstances change!
Make sure the policy covers the cost of care in the type of facility you want to live in. Some policies only cover the cost of care in nursing homes. Meanwhile, coverage with other policies may extend to care in assisted living facilities and adult day care centers. Really think about what you want and choose a policy that corresponds to that!
Read the fine print. Before you sign up for a policy, carefully read the fine print to understand the coverage and exclusions. If you don’t understand a policy, don’t sign it without making sure you do! Contact a financial advisor, retirement planner, or insurance advisor. Don’t be afraid to ask questions!

Is There Anything Long-Term Care Insurance Doesn’t Cover?

While long-term care covers a wide range of services, coverage doesn’t extend to every possible care option. Typically, long-term care doesn’t cover:

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Custodial care: This type of care provides assistance with ADLs, such as eating or bathing. However, it does not include skilled medical care.
Medical care: This includes doctor’s visits, hospital stays, and prescription medications.
Room and board in a nursing home: Generally, long-term care insurance only covers skilled nursing care that is provided by licensed professionals.
Care provided by family members: Sadly, if you plan to hire a loved one as a caregiver, then your policy will not cover this.
Pre-existing conditions: Unfortunately, most long-term care insurance policies have a waiting period for pre-existing conditions. This means that the policy will not provide coverage for those conditions until the waiting period has passed.
Care that is not medically necessary: Unless the care you require is medically necessary and provided by a licensed healthcare professional, most long-term insurance policies will not extend coverage to you.

Bottom Line

While long-term care insurance can provide substantial financial support, it’s essential to understand the specifics of your policy and how benefits are determined. Always consult with an insurance professional or financial advisor to ensure you’re making the best decision for your long-term care needs. And remember—it’s more likely that you will need long-term care insurance at some point. So, make sure that you plan accordingly. Your future self will thank you!