Long Term Care Insurance: The Ultimate Guide

Shawn Plummer

CEO, The Annuity Expert

Like most people, long-term care insurance is something you’ve never considered within your financial plans. But it’s essential to think about these things ahead of time so that when the time comes when you need LTC insurance, there’s no scrambling and long waiting periods to get your coverage in order! So let’s talk about long-term care insurance and then request a quote.

What is Long-Term Care Insurance?

When you have a chronic medical problem, a disability, or a disorder such as Alzheimer’s, LTC insurance coverage reimburses the expenses of that treatment. The majority of plans pay for therapy received in a variety of institutions, including:

  • Home Health Care
  • Nursing Home
  • Assisted Living Facility
  • Adult Day Care

It is crucial to think about long-term care costs. If you wait until you need care when you’re in poor health, you will not be able to purchase coverage. The best time to buy a long-term care policy is in your 50s and 60s because most people can still work at that age and enjoy a healthy lifestyle.

Whether an LTC policy is the right choice depends on your situation and preferences.

How To Qualify For Long-Term Care Benefits

Private insurance policies and Medicaid use ADL measures to decide when someone is eligible for benefits. Usually, you need to lose two abilities from a list of six abilities to get benefits. Then, the insurance policy will list the abilities used to decide if someone gets benefits. You might also be eligible for long-term care if you have a severe cognitive impairment. Impairment usually means that you have lost some ability related to your physical or functional abilities.

Activities of Daily Living (ADLs)

People usually take for granted the things they do daily, like getting out of bed or taking a shower. But for someone with limited mobility or cognitive impairment, these things can be challenging.

ADLs are activities that people do every day to take care of themselves. These activities can be done by people who need help or those who don’t need help. The extent to which someone can do these activities is an excellent way to measure how much support they might need in the future.

ADLs include:

  • bathing on your own
  • maintaining continence
  • eating
  • toileting
  • dressing yourself
  • transferring (mobility)

What is Long-Term Care?

Long-term care is not one service. Instead, a range of services helps people who cannot support themselves. Such services help with medical needs, personal needs, and social needs. Long-term care is often referred to as “Senior Care” or “Elder Care.”

Informal Care

Informal care is unpaid care typically provided by a family member or friends. This type of care has been the most common way to care for older adults for a long time. Neighbors or volunteer groups can also provide it.

Formal Care

Formal care is when someone gets help from a qualified service or facility. There are two types of formal caregivers:

  • paid workers and
  • volunteers.

The organizations they work for can be for-profit or nonprofit. Some examples of places that provide formal care include:

  • senior centers,
  • adult daycare,
  • charitable groups,
  • home health agencies,
  • assisted living facilities,
  • intermediate care facilities,
  • skilled nursing facilities,
  • state aging services, and
  • hospice care.

Usually, formal care workers are trained and can do things that informal caregivers cannot.

Many different formal care services help people with chronic conditions. People who need long-term care often have physical and mental disabilities, which means they need different types of care, which can take place in a variety of settings, including:

  • in an individual’s home
  • at sites in the community (adult day care center)
  • in assisted living (ALF)
  • in a skilled nursing facility (SNF)

Receiving care and services in your home or a community allows you to continue living there instead of going to a home. It is essential to manage long-term care so that people who want to stay in their homes can do so for as long as possible.

Custodial Care

Custodial care helps people do things they cannot do alone, like getting dressed or going to the bathroom. Custodial care is not skilled medical care or therapy and does not require a doctor or nurse to always be there.

Intermediate Care

Intermediate care is nursing and rehabilitative care that is not always medically necessary and is required only occasionally or part-time. Skilled practitioners perform the care.

Skilled Care

Skilled care is a high level of nursing and medical care necessary for people who need to be closely monitored. This type of care is administered in non-hospital-based nursing facilities. This type of care includes nursing care, therapy, and rehabilitation.

Types of Care Facilities And Services

Residential Care Facilities

Board and care homes, also known as residential care homes, are living situations where people receive help with everyday activities in a group setting. These homes can be a good option for those who need some assistance but don’t want to live alone.

Residential care facilities are staffed by the people who live there. They offer a home-like environment for elderly or disabled residents. While they generally help with daily living activities, they encourage residents to make choices about their daily lives and health care.

Board and care homes do not provide nursing or medical services. They don’t usually offer planned activities or transportation services. They are congregate living facilities. Many of these homes are uninsured.

Nursing Home

Now known as skilled nursing facilities, nursing homes are intensive levels of care that necessitate the continuous involvement of physicians and a trained nursing or rehabilitation staff. Many elderly or disabled individuals require specialized nursing care and extended long-term help. Skilled nursing facilities may also offer rehabilitation, other medical treatments, personal attention, meals, and recreation in a safe and supervised setting to these patients.

Home Health Care

Home health care services provide health services that help people manage their health care at home. The goal is to promote, maintain, or restore their health. In-home care assistance is very personalized and typically includes the services of the following:

  • registered nurses and licensed practical nurses
  • home health aides
  • medical social workers
  • case managers/geriatric care managers
  • physical therapists
  • occupational therapists
  • speech therapists
  • hospice organizations

Assisted Living Facilities

ALFs are places where people can live independently but can’t live on their own. They still get to do things independently, but they have help with other things they might not be able to do. There are people there who will help them with whatever they need and ensure they’re safe.

These independent living facilities are a less expensive alternative to more restricted, institution-like settings for people who require constant nursing care. Residents usually reside in apartment-style rooms with lockable doors and individual bathrooms.

Adult Day Care

Adult daycare is a service that provides activities, healthcare, and meals to adults during the day. This type of care is a good option for elderly adults who need daily supervision. Many different local centers offer this service.

Adult day service programs are for people with mental or physical limitations, adults with cognitive or functional impairments, or those who need social interaction. The programs are set up to have a place to go when their family caregivers need a break from taking care of them.

Most adult day centers operate during regular business hours from Monday to Friday. However, some centers offer evening and weekend hours as well. An adult day center is not meant for 24-hour care but provides supervision and assistance for seniors during the day.

These programs offer relief to family members and caregivers. They can now work or relax knowing their elderly relative is safe and well cared for.

Is Long-Term Care Insurance Worth It?

The Federal Government predicts that 7 out of 10 retirees above 65 will need some long-term care in their lifetime. Therefore, Washington is charging a payroll tax to all WA employees to fund LTC in the future.

Long-term care is not covered by regular health insurance. Medicare will not help either. Covered care only includes short stays in nursing homes or rehab, but not custodial care.

Related Reading: What Do I Need To Know About Medicare Costs?

If you do not have insurance to cover long-term care, you will have to pay for it. But there is help. You can get Medicaid, a government program that helps low-income people.

You will have to live in a nursing home if you need Medicaid. Medicaid doesn’t pay for assisted living care in many states.

What Does Long-Term Care Insurance Pay For

Long-term care insurance pays for both formal and informal care that includes:

The Cost of Long-Term Care

The cost of long-term care insurance varies depending on several factors, including the age and health of the person applying for coverage. The younger and healthier someone is, the lower their premiums will be. However, it is important to note that long-term care insurance is not cheap. Premiums can range from a few hundred dollars per year to several thousand dollars, and most policies have a waiting period of at least three years before benefits kick in. Below are the median cost for common long-term care services and facilities.

Nursing Home

  • The median cost of care in a semiprivate nursing home room is $93,072 a year, according to Genworth’s 2020 Cost of Care Survey.
  • The median nursing home cost in a private nursing home room is $105,850 a year, according to Genworth’s 2020 Cost of Care Survey.

Community and Independent Living

  • The median cost of Adult Daycare is $19,240 a year, according to Genworth’s 2020 Cost of Care Survey.
  • The median cost of an Assisted Living Facility is $51,600 a year, according to Genworth’s 2020 Cost of Care Survey.

Home Healthcare

  • The median cost of Homemaker Services is $53,768 a year, according to Genworth’s 2020 Cost of Care Survey.
  • The median cost of a Home Health Aide is $54,912 a year, according to Genworth’s 2020 Cost of Care Survey.

The Cost For Long-Term Care Insurance

Buying traditional LTC insurance might not be affordable if you have a low income and little savings. Standard long-term care insurance is also a “use it or lose it” type of insurance similar to car insurance which means all the money used on premiums is wasted.

The average cost for traditional long-term care insurance is $2,000 a year, and the price can increase in the future.

Long-Term Care Insurance Cost Factors

  • Your age and health affect how much you will pay for a policy. If you are older or have more health problems, the more you will pay for a policy.
  • Your gender affects the cost. For example, women may pay more than men because they generally live longer and have a greater chance of making long-term care insurance claims.
  • If you are married, you can get cheaper insurance.
  • Different insurance companies will charge different prices for the same amount of coverage. That is why it is essential to compare quotes from different carriers.
  • The coverage amount and additional benefits.

What Is The Best Long-Term Care Insurance?

Many types of long-term care insurance policies are available, and the best policy for you will depend on your individual needs and circumstances.

One popular type of long-term care insurance is life insurance with a long-term care rider. This policy provides both life insurance coverage and long-term care benefits, making it a great option for people who want both types of protection.

Another option is a long-term care annuity, which can be used to help pay for long-term care costs. These policies typically have higher premiums than life insurance policies, but they also provide more flexibility in how the benefits can be used.

Regardless of which policy you choose, shop around and compare different options before making a decision.

Permanent Life Insurance

Riders are optional benefits available on some permanent life insurance policies, like whole life. The policy lets you withdraw money from the life insurance payout to pay for long-term care expenses while alive. As a result, the death benefit to beneficiaries will be lower by the amount used for long-term care.

Tip: The Annuity Expert is the best place to get life insurance quotes. We offer the largest selection of life insurance policies in the United States so that you can receive the best policies at the cheapest rates. In addition, some policies provide a “Return of Premium” feature that gives you a money-back guarantee at any time in case you need it for something else.

Long Term Care Annuity

A long-term care annuity is a deferred fixed annuity (hybrid annuity) designed to help pay long-term care costs without destroying retirement savings and providing tax advantages. The LTC annuity doubles (200%) or triples (300%) the investment (based on medical records) to generate a tax-free long-term care insurance benefit. LTC annuities also pass a death benefit onto beneficiaries if money is left in the annuity.

Long-Term Care Insurance

Hybrid Long-Term Care Life Insurance Policy

Asset-based LTC provides a set of benefits for long-term care costs if you need it, in addition to a death benefit for beneficiaries. Typically you pay one large premium upfront or a series of premium payments.

How To Buy Long-Term Care Insurance

  1. Decide how much coverage you want.
  2. Shop and compare long-term care insurance quotes.
  3. Fill out an application and answer health questions. The insurer might ask to see medical records and interview you by phone or in person.
  4. Once you are approved for coverage, you start paying premiums.

You can buy insurance directly from a long-term care insurance agent or employer.

How To Use Long-Term Care Insurance

To be eligible for long-term care insurance benefits, you must be unable to function at least two out of six “activities of daily living” (ADLs) on your own, or you have dementia or other cognitive impairment.

The Six ADLs

  1. Bathing
  2. Caring for incontinence
  3. Dressing
  4. Eating
  5. Toileting
  6. Transferring (Mobility)

If you need care and want to make a claim, the insurance company will review medical documents from your doctor. They may also send a nurse to do an evaluation. If they approve your claim, they must also approve your service or facility of care.

Most insurance policies have a waiting period before benefits can be used and say that after the “elimination period” (30, 60, or 90 days), you will get reimbursed for all of your medical expenses, up to the lifetime maximum. Under certain circumstances, there are shorter elimination periods to qualify for benefits and sometimes a zero-day elimination period.

Most long-term insurance policies will pay for care after you are eligible for benefits. They usually start paying out after you pay for care and up to a certain amount per day or month.

Married Couples

Some insurance companies allow couples “joint coverage,” allowing spouses to share the cost of a long-term care insurance policy.

Is Long-Term Care Insurance Tax Deductible?

Long-term care insurance can have some tax benefits. If you itemize deductions, you can count part or all long-term care insurance premiums as medical expenses. The limits for how much of a deduction you get increase with your age.

Age at the end of the yearMaximum deductible premium
40 or under$450
41 to 50$850
51 to 60$1,690
61 to 70$4,520
71 and over$5,640

Inflation Protection

Because most claims do not occur until many years after purchasing the product, an LTCI program must have inflation protection. As noted earlier, in 10, 15, or 20 years, the daily cost of skilled nursing home care may be much more than it is today. As a result, virtually all LTC insurers offer either a guaranteed purchase option, which allows policyholders to buy additional coverage periodically or an annual benefit inflation option, which automatically increases a policy’s benefits every year on a compound or simple interest basis.

Does Medicare Pay For Long-Term Care?

A lot of people think that Medicare will pay for their long-term care. But that’s not true because they’re health plans, not care plans. Medicare only pays for medical expenses for things that happen suddenly, like a stroke or cancer. Then, once the person is out of the hospital and done with treatment, they’re on their own again regarding long-term care costs.

Medicare will pay for skilled nursing care in a facility for a brief period if the beneficiary meets specific criteria. The following is required to qualify for Medicare coverage of this type:

  • The applicant must have been admitted to a hospital for at least three days.
  • Within 30 days of discharge from the hospital, the patient must be accepted into a skilled care facility.
  • A doctor must verify that expert care is required.
  • A health care service or treatment not provided by a Medicare-certified facility is not covered.

Medicare will not pay for personal care services or custodial care outside of a nursing facility. However, if an individual needs help with ADLs due to a need for skilled nursing or rehabilitation, Medicare will cover all of their needs in the facility.

Long-Term Care Insurance Companies (We Recommend)

As people live longer, the need for long-term care insurance is on the rise. Traditional long-term care insurance policies can help to cover the costs of nursing home care, in-home care assistance, and assisted living.

  • Mutual of Omaha is a leading provider of long-term care insurance, and they are A+ Rated (As of 02/2022 by AM Best).
  • They offer competitive rates and aggressive underwriting for many medical conditions.
  • Mutual of Omaha is also one of the oldest insurers in the business, founded in 1909. With over a century of experience, they have a proven track record of providing high-quality coverage to their policyholders.

Disclaimer: We are licensed life insurance agents for Mutual of Omaha. If you need a quote or want to apply, contact us below. There is no charge for the service. We strongly discourage applying without the assistance of an agent because if you apply on your own and get declined coverage, for whatever reason, no other life insurance company will consider you for coverage for approximately two years.

Next Steps

As you can see, long-term care insurance is a must-have for all retirees. The government predicts that 70% of seniors will need long-term care. That’s a pretty high percentage and will only continue to rise as the population ages. Unfortunately, long-term care can cost tens of thousands of dollars per year. But with life insurance and annuities, you can cover all the costs at a fraction of the price. Request a quote today to determine how much you could save on your long-term care expenses. We would be happy to help!

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Frequently Asked Questions

Does Medicare Pay For Long-Term Care?

Medicare does not pay for long-term care. Instead, Medicare is designed to cover medical expenses for acute illnesses. This short-term insurance includes hospital insurance, medical insurance, Medicare Advantage plans, and Prescription Drug Coverage.

Who regulates long-term care insurance?

The National Association of Insurance Commissioners (NAIC) and their state insurance commissioner counterparts regulate the LTC industry.

Who offers the best hybrid life insurance long-term care policies?

Because of their higher maximum coverage levels and A+ (Superior) rating with A.M. Best, OneAmerica and Lincoln Financial offers the best hybrid life insurance long-term care policy.

Related Reading

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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