Long-Term Care

Long-Term Care Insurance

Policy Points

The premiums for long-term care insurance are dependent on multiple factors, including:

  • The applicant’s age—age is a determining factor; the older a purchaser, the higher the premium.
  • The applicant’s health
  • The features of the policy
  • Individual or group plans
  • Available discounts (for example, good health)

Here are some of the features to explore in long-term care insurance policies:

  • Annual premium
  • Eligible services/exclusions and limitations
  • Eligible settings, authorized providers and limits on benefits for each setting
  • Benefit triggers—certain requirements that are used to determine eligibility for benefits, such as inability to perform a certain number of activities of daily living; cognitive impairment; doctor certification of medical necessity; inclusion of a prior hospitalization requirement
  • How benefits are paid
  • Maximum benefit amount (daily, weekly, monthly, life of the policy)
  • Pooled or joint benefit (total benefit that applies to all individuals covered under the policy)
  • Benefit period (a specific number of years, unlimited)
  • Waiting or elimination period—number of days to wait until benefits begin
  • Stricter terms or exclusions for preexisting conditions
  • Premium adjustments
  • Inflation protection, which increases the benefits each year to keep pace with inflation
  • Group rates, such as those available to federal or U.S. Postal Service employees or annuitants, and members or retired members of the Uniformed Services or their spouses (or other qualified relatives) under the Federal Long -Term Care Insurance Program

It is also important to look at the tax advantages of policies. There are non-tax qualified policies, which are usually not deductible as a medical-related expense, and tax-qualified policies. Under a federal law, the Health Insurance Portability and Accountability Act of 1996, tax-qualified long-term care insurance contracts, or qualified contracts, provide purchasers with some federal income tax advantages. There may be other tax advantages in specific states. In addition, employees with Health Savings Accounts (HSAs) may use these pre-tax dollars, besides funding medical and prescription drug costs, to purchase long-term care insurance as an individual or group plan offered by an employer.

Lastly, check out the company and the agent selling the policy, and ensure that both the company and agent are licensed in the specific state to sell long-term care insurance. The state health insurance department is a good source of information.

Nearly all policies specifically say they will cover services for Alzheimer’s disease, according to the National Association of Insurance Commissioners.

We never know what lies ahead. Long-term care insurance is designed to help individuals and their dependents plan for the unexpected and help protect against the high cost of care and services associated with a severe illness, injury, or supervision due to a cognitive impairment.

If people are unable to care for themselves, long-term care insurance can assist in covering the cost of long-term care services provided at home, an adult day center, an assisted living facility or a nursing home—essential everyday care like help with eating, dressing and bathing. Certain conditions, such as severe cognitive impairment or inability to perform a certain number of activities of daily living, determine when the insured person will receive benefits, subject to an assessment by an insurance company representative. Benefits vary with the term of the insured person’s policy, and the daily benefit may not equal the daily cost of care.

Should you or shouldn’t you purchase long-term care insurance? Here are some general rules of thumb, according to the National Association of Insurance Commissioners:

You should not buy long-term care insurance if:

  • You cannot afford the premiums.
  • You have limited assets.
  • Your only source of income is a Social Security benefit or Supplemental Security Income (SSI).
  • You often have trouble paying for utilities, food, medicine or other necessities.
  • You are on Medicaid.

You should consider buying long-term care insurance if:

  • You have significant assets and income.
  • You want to protect some of your assets and income.
  • You can afford to pay premiums, including possible premium increases, without financial difficulty.
  • You want to stay independent of the support of others.
  • You want to have the flexibility of choosing a specific long-term care setting.

Applicants must meet medical underwriting standards to be eligible for long-term care insurance. A person with a preexisting medical condition or addiction may be denied coverage or be subject to stricter terms. Individuals with existing health problems that indicate the likely need for long-term care—for example, Alzheimer’s disease or Parkinson’s disease—probably would not be able to buy a policy, according to NAIC. Check with the state insurance department in the state in which the potential policyholder resides since some states do not permit certain exclusions.

A licensed professional can help you select the right policy, the right benefits and the right carrier.

For more information about long-term care, connect with the Alzheimer’s Foundation of America’s licensed social workers. Click here or call 866.232.8484. Real People. Real Care.

Alzheimer's Foundation of America  866.232.8484