How Long-Term Care Insurance Works
When you buy a long-term care insurance (LTCi) policy, you are purchasing the ability to receive
benefit dollars to pay for qualified long-term care expenses. The long-term care coverage provided by a given policy varies
from one company to another. Policyholders are eligible to file a claim when they are unable to perform two or more of the
activities of daily living without substantial assistance from another individual due to a loss of functional capacity, which
is expected to last at least 90 days. Policyholders may also become eligible for claim if they have suffered a severe cognitive
What is the best age to buy a policy?
There is not a single set age at which it is best to purchase long-term care insurance. Everyone’s
financial situation is different, and people have various reasons for prioritizing the order in which they acquire financial
and insurance products. Two important factors to consider when deciding when to buy long-term care insurance
1. The cost of long-term care insurance generally increases as you
get older. That is why many people want to apply for coverage at a younger age so they can have a lower
premium. For example, a person who buys long-term care at age 55 will pay a higher annual premium amount
than someone who purchases the same coverage at age 50.
is best to buy long-term care insurance when you are younger, healthier and more likely to be approved for coverage.
Long Term Care policies do not have exclusions or ratings. You are either approved for coverage
or declined. That is why many people want to have a policy issued when they are younger, before any medical
problems arise that would prevent them from getting coverage.
Are long-term care services very expensive?
Long-term care services can be very expensive. Costs vary widely by region and the type of care.
According to the most recent data in the National Association of Insurance Commissioners’ (NAIC)
“A Shopper’s Guide to Long-Term Care Insurance” brochure, a year in an assisted living care facility in
Florida averaged $44,616 per year. It’s impossible to predict how long a person may need care. Using this average
figure, just three years of assisted living could cost $133,848.
Can health factors disqualify you from coverage approval?
There may be health concerns that limit your eligibility for LTCi. Applicants are underwritten and health and
mental status can affect insurability or premium rates. The majority of applicants who apply for long-term care insurance
coverage are approved. It’s important to check with an agent before deciding whether or not to apply.
Many health conditions would not necessarily cause you to be declined.
The Long-Term Care Underwriting Process
many other life and health related insurance products, the long-term care insurance underwriting process does not require
a new medical exam or blood or urine test. Depending on your age and other factors, companies may need to review your recent
medical records and/or conduct a telephone interview. In some cases the insurer will conduct a face-to-face interview of an
You Determine Your Long-Term Care Insurance
Premiums are determined by your age at time of purchase, the
amount of coverage you choose, the length of your waiting period, the inflation option you select, and any additional riders
you purchase. Keep in mind that premiums are level once the policy is issued. The
cost does increase with age, so the younger you are when you buy a policy, the less you will pay in annual premiums over your
o If you’re married, you will receive a discount.
a "sibling discount" is available for siblings who reside in the same household and who both apply and are approved
o When considering long-term care insurance premiums, remember
to weigh costs against the potential pool of benefit dollars available to you. When most people look at the potential benefits
in this manner, they realize long-term care insurance can be a ‘pennies on the dollar’ expenditure.
o Some companies offer an optional Return of Premium Upon Death Benefit Rider that you
can add to your policy at the time of purchase. With this rider, all of the premiums you paid into the policy, minus any claims
paid, may be returned to your estate after death.
The Tax Advantages of Long-Term Care Insurance
laws at both the federal and state levels may provide incentives for individuals and businesses to purchase qualified long-term
care insurance policies with the goal of decreasing the public’s reliance upon Medicaid and Medicare as resources for
funding long-term care services.
Federal tax deductions are sometimes available
for individual, non-business owners who itemize medical expenses. Additionally, some states offer individual state-level tax
The Government and Long-Term Care Coverage
Many people think the government will automatically pay all of their long-term care needs. The
government pays for some long-term care services, but planning for the government to pay all of your long-term care costs
may not be the best option for you.
o Medicaid — Medicaid is a government
program that may pay for skilled nursing home services, and some home and community-based care for low income Americans who
have spent most or all of their assets. To qualify, one has to meet federal and state guidelines for income and assets. Many
people who are living in nursing homes entered the facility paying for care out-of-pocket. Once they spent enough of their
assets that they met Medicaid eligibility requirements via asset “spend-down,” Medicaid begins covering the cost
of their care. Not all nursing homes accept Medicaid patients, and Medicaid can dictate which nursing home a patient will
use. Individuals who are concerned with keeping assets, protecting retirement/financial plans, or want more control of the
care they will receive, should not rely on Medicaid for their long-term care needs.
o Medicare — Medicare may cover
up to 100 days of skilled nursing home care if certain conditions are met, but it’s not designed to be a long-term care
financing tool. There are many exclusions and limitations. For example, Medicare does not pay for any homemaker
services, home health aides or assisted living costs. You should not rely on Medicare for your long-term care needs.