Long term care (LTC) insurance is coverage that pays for assisted living, nursing home care or home care when a person is unable to care for themselves. A person who has a LTC policy will normally qualify for benefits under the policy when they cannot meet a certain number of the six Activities of Daily Living (ADLs).
The six ADLs are:
- Bathing − The ability to clean oneself and perform grooming activities like shaving and brushing teeth.
- Dressing. The ability to get dressed by oneself without struggling with buttons and zippers.
- Eating. The ability to feed oneself.
- Transferring. Being able to either walk or move oneself from a bed to a wheelchair and back again.
- Toileting. The ability to get on and off the toilet, and
- Continence. The ability to control one's bladder and bowel functions.
Most long-term care policies reimburse the policyholder in a variety of places such as their own home, a nursing home, an assisted living facility, or an adult day care center.
In 2018 it was estimated that about half of todays 65-year olds will eventually develop some type of disability and require long term care. Most will need services for less than 2 years, but approximately 14% will require care for more than 5 years.
Most people who purchase LTC policies do so in their mid-50s to mid-60s.
The primary reasons people buy long term care policies are:
- To protect their assets and savings. According to Genworth’s 2018 Cost of Care Survey, the median cost of a semi-private nursing home room is over $89,000/yr.
- If more money is available, more long-term care choices are available and this translates to a better quality of care. Medicaid payments are only accepted by nursing homes that accept payments from government programs. And Medicaid does not pay for assisted living in many states.
When buying a Long-term care policy, a person is asked to choose the amount of coverage they want (and can afford). Policies usually cap benefits at the amount paid out per day and the total amount paid out in a lifetime.
There is usually a waiting period (similar to an insurance policy deductible) when a person must make payments out of pocket. Waiting periods are normally 30, 60, or 90 days. Longer waiting periods usually equate to lower policy premiums.
Cost of coverage is dependent of several factors like 1) age and health, 2) gender (women generally pay more than men because they have a longer life expectancy), 3) marital status (premiums are lower for married people), the insurance company, the amount of coverage, and the waiting period chosen.
Although LTC policies usually have the characteristics listed above, popular plans provide coverage in different ways and have differing pros and cons. In addition, policy endorsements may be offered that can affect the total policy cost.
The best recommendation is to begin your study of LTC policies and coverage as early as possible so that you will have the time needed to assess available policies and their associated costs.