What is long-term care insurance?

As we age, the need for long-term care becomes a growing concern. As much as we’d like to think that our children will take care of everything (and they might!) the cost for long-term care can still be an issue. Who will pay for the care? Can you?

If this is a question you worry about, long-term care insurance may be a solution for you. Oftentimes, long-term care insurance is confused with life insurance, disability insurance, critical illness insurance, or other medical-related financial products. Long-term insurance is a separate product—though often sold together with other more common insurance policies. 

Read on to find out exactly what long-term insurance is, who needs it, and how it differs from other products on the market.

What is long-term care insurance?

Long-Term Care (LTC) insurance is a fixed income allotted to you if you can no longer support yourself. The money from this insurance is used to help people get the care they need when they can no longer complete Activities of Daily Living (ADLs) themselves. 

Activities of Daily Living include: 

• Feeding yourself
• Dressing yourself
• Bathing yourself 
• Toileting yourself
• Moving yourself 
• Maintaining continence

It can be difficult to imagine yourself in such a vulnerable place both physically and financially, and you may want to avoid thinking about it altogether. However, as we age the reality that we will require others to care for ourselves becomes unavoidable.

While we can’t stop many of these inevitabilities, we can protect ourselves financially. The best way to protect your future self and your family’s financial well-being is to create a plan now.

How does long-term care insurance work

Like other insurance policies, with long-term care insurance, you pay the insurance company your pre-determined premiums, and if you have to make a claim, the insurance company will pay out the predetermined benefit. With this policy, you essentially give yourself a payment plan for long-term care that’s spread out over the years, rather than having to foot the bill at once when you are most vulnerable.

Long-term care coverage generally covers care: 

• At your house
• At an adult day-care facility 
• At an assisted-living facility 
• At a long-term care facility

How to set up long-term care insurance

Step One: Pick your plan 

You can purchase a long-term care insurance policy directly through an insurance company, or it may be provided to you through your employer. When choosing your plan there are some factors to consider: 

• The price: How much can you afford to pay for premiums?
• The benefit amount: How much will you reasonably need to cover your care needs when you’ll need care? Will you want it to be a fixed monthly amount or coverage per service?
• The waiting period: Most policies have a waiting period (or elimination period) before you can make a claim. Sometimes this is 30, 60, or 90 days, but there are also policies with zero waiting periods. The shorter the waiting period, the more expensive the premiums will be. 
• Benefit timeline: Some policies offer benefits for a 2, 5, or 10-year period, or even for a lifetime. Longer coverage will have a higher premium, but it’s a good idea to plan for the worst-case scenario—you wouldn’t want your benefits to run out when you need them most. 
• Inflation protection: We already feel the impact of inflation, so if we can protect ourselves from the financial stress it causes, we should! When choosing benefit amounts and timelines, it’s important to consider that the cost of care will go up every year.

Our expert insurance advisors can connect you with one of our partner insurance companies to get you the best long-term care benefits for your needs. It starts with a simple phone call to discuss your insurance needs. Our empathetic and knowledgeable advisors can help you choose the plan that’s right for you!

Step Two: Submit a claim 

When the time comes, you’ll need to submit a claim to make sure your care costs are covered. Each policy will have its own criteria of what you can claim and when—as we mentioned, some policies have a waiting period before the long-term care insurance benefits kick in. You may have to pay out of pocket in the meantime. 

Who needs long-term care insurance?

Anyone who wants to ensure their care is covered if they are unable to perform daily activities should get a long-term care policy. But in particular, this type of insurance is important for:

• Those who do not want to or cannot depend on their family to cover their long-term care costs
• Those who have a family history of degenerative illness
• Those who don’t want to dip into their retirement savings to pay for extra care  

Like health insurance, this product helps spread the cost and alleviate some of the financial burdens of healthcare.

What are the pros and cons of long-term care insurance?

Every insurance policy has pros and cons depending on what your financial goals are.