What is Long-Term Care Insurance and What Does It Cover?

Whether you’re in your 50s or 60s, still working, or retired, it’s never too soon to think about long-term care (LTC) insurance. This type of insurance can be used as a primary means of preparing for the day when you or a loved one is going to need help with daily activities such as bathing, dressing, and eating or ongoing care in a senior living community like Assisted Living or Memory Care.

How does long-term care insurance work? What does it cover and how long will it last? When should I get long-term care insurance? These are just a couple of common questions that seniors or their loved ones need answers to when considering LTC. To help you better understand these questions and assist you in deciding whether this is something you should consider immediately or down the road, Referah has provided some expert insight.

What Long-Term Care Insurance Covers

Long-term care insurance policies are unique to each beneficiary but generally cover a comprehensive list of measures. This can include the following in part or in full:

• Home Care and Home Health Care
• Short-Term Nursing Home Care
• Assisted Living
• Memory Care
• Adult Day Care
• Support with Activities of Daily Living (ADLs)
• Hospice Care (Short-Term)

What Long-Term Care Insurance Does Not Cover

Most policies will have limits on what will be covered. It’s fairly routine for insurers to deny care for alcoholism, drug addiction or combat-related injuries. Pre-existing conditions, such as heart disease or a history of cancer, won’t always stop you from getting a policy, but there might be some restrictions on benefits related to those conditions.

If you decide to stop paying premiums before you qualify for benefits, you will lose coverage and will not be reimbursed for any payments you’ve made. Depending on your policy, if you never use the coverage, the insurance company can keep your payments and use it to pay the claims of others while making a profit.

When You Should Consider Long-Term Care Insurance

Studies show that approximately 70 percent of Americans who reach age 65 will need some form of long-term care, and at least 20 percent will require it for longer than 5 years. However, waiting until you actually need care to buy long-term care insurance isn’t really a viable option, as you won’t qualify if you already have a debilitating condition. It’s important to plan ahead, just as you do when buying a life insurance or disability insurance policy.

In fact, long-term care policies are similar to life insurance. For example, you pay the premiums on your policy over a period of years and when you require the benefit, it is available. LTC policies follow the same approach where premiums are paid throughout the years and you collect on the policy when needed or if it is never needed, your loved ones can collect.

Is Long-Term Care Insurance Worth It?

Buying an LTC policy in your 50s is often an advantageous move because many people in that age range are at or near the peak of their earning years, and thus will be able afford such a policy. Also, by that age, many individuals will have raised children and paid debts such as student loans, making it financially more viable to buy a long-term care insurance policy.

What Happens to Unused Long-Term Care Insurance?

It is possible that seniors could never require long-term care insurance before the end of life. While some simply lose their benefits, there are numerous policies that allow those unused benefits to have value, such as benefits shared with spouses, added annuity payments, premium returns when policies are unused, and more.

Who Qualifies for Long-Term Care Insurance Benefits?

Securing long-term care insurance is best done early to avoid paying high premiums which increase year after year. It’s also critical to apply when you are eligible, usually ahead of any major illness or injury. Many insurance providers will issue coverage for seniors with a relatively clean bill of health.

However, eligibility for LTC benefits can still be triggered when you’ve reached the point where you can’t perform at least two activities of daily living (ADLs), including:

• Bathing and showering
• Dressing
• Eating
• Getting in and out of bed
• Walking
• Using the bathroom
• Personal hygiene
• Moving about in a safe and comfortable manner
• Cleaning and housekeeping
• Transportation (groceries, doctor’s appointments, errands, etc.)

Formal documentation from a doctor is needed in order to confirm inability to perform ADLs and to receive coverage.

What Disqualifies You from Long-Term Care Insurance

The inability to be insured generally comes through a variety of combinations of illness and overall health status. For example, the existence of pre-existing conditions such as dementia or diabetes in relation to a person’s use of tobacco can be reasons for a denial. This is why securing coverage early is critically important, especially as care needs for seniors can rapidly change.

How Does Long-Term Care Insurance Work?

In order to buy a long-term care insurance policy, you’ll have to fill out an application and answer questions about your health. The insurer will likely ask to see your medical records, and require you to be interviewed, either by phone, via video conferencing, or in person. It’s up to you to choose the amount of coverage you want; most LTC policies cap out the amount paid per day and the amount paid during your lifetime.

Under most policies, you’ll have to pay out of pocket for a certain amount of time, usually referred to as “the elimination period,” before the insurer starts reimbursing you for care. Depending on the insurer and the type of policy you purchase, this period can be 30, 60, 90, or 180 days.

How Much Does Long-Term Care Insurance Cost?

The cost of your policy will depend on a number of factors, including:

• Your age and overall health – As we’ve mentioned, it’s beneficial to purchase a policy in your 50s or 60s, if possible. The older you are and the more health problems you’ve started to experience, the more you’ll have to pay into your policy. (A caveat: if you’re in your 50s and in good health, and you have a strong family health history with many relatives who have lived well into their 80s and 90s, you might want to wait before purchasing LTC insurance. You might be paying premiums for 20 or 30 years before you require any benefits.

Marital status – Premiums are generally lower for married people.

• Gender – Women typically pay more than men because they have a greater life expectancy (about five years in North America) and thus a greater chance of making long-term care insurance claims covering anywhere from a few months to several years.
• Insurance company and amount of coverage – As the old saying goes, it’s always advisable to “shop around.” Just as you should explore a number of options when considering moving to an Assisted Living Community, you should get quotes from at least two or three different insurance companies. You’ll also pay more for more extensive coverage, i.e., policies that have a shorter elimination period, policies that include cost-of-living adjustments and policies that place fewer restrictions on the type of care covered.

Referah has a wide variety of resources available for seniors and their families to use when making sustainable decisions. For example, for assistance with medication management, read our next article “What is Poly Pharmacy?”

Find Senior Care Near You

As you consider the advantages of buying long-term care insurance, you might also be exploring senior living communities for assistance with care. Referah Family Connection Agents are available to answer your questions and help you find the perfect community that fits your requirements. Talk with us today and find senior living near you!