Long Term Care Insurance, sometimes called Nursing Home Insurance, is a policy that pays for some or all a senior’s long-term care costs in exchange for monthly premiums that typically range from $250-$1,000 / month. Depending on the policy, services at home, in adult day care, in assisted living and in nursing home communities can be included.
LTC insurance is attractive because the monthly premiums are known in advance and therefore can be built into a budget. Plans are very flexible and can be structured to meet variety of needs.
Plans can cover the costs of in-home care, adult day care, assisted living, skilled nursing or all of them. One may choose a daily or monthly care allowance. For example, a plan can payout $50 / day if the individual resides at home and $150 / day if they are in residential care. Alternatively, one may choose coverage areas, like skilled nursing but not assisted living. In some rare cases, a family member can even receive payments for the care they provide at home.
For healthy seniors, Consumer Reports recommends not purchasing coverage before the age of 60. The older a senior is, the higher their monthly premiums with the expectation that the senior will be paying those premiums for a shorter period of time before they need benefits. Other factors affecting cost include benefits covered, current age and the health of applicant. Younger seniors should expect to pay, at a minimum, several hundred dollars per month. The cost could be as high as several thousand dollars per month for older seniors.
Qualifying for Long Term Care Insurance
There are no age requirements to purchase long term care insurance. While insurance companies may recommend an individual purchase the policy as young as 40 years old, Consumer Reports recommends waiting until the age of 60. Waiting too long to purchase a policy can result in prohibitively expensive premiums.
Applicants for long term care insurance need to be in good health. Elderly individuals will likely be denied if they already require long-term care or need help with activities of daily living such as bathing and dressing or have any of the following conditions: AIDS, Alzheimer's, Parkinson’s, MS, any dementia or progressive neurological condition or have had a stroke or metastatic cancer.
Marital status typically does not affect eligibility for long term care insurance though it may affect premiums.
How the Benefits Work
Long term care insurance benefits depend entirely on the policy. Some plans will reimburse seniors and others will make payments directly to the service providers. Most plans require that a professional service take place to receive the benefit. For example, a family member won’t be compensated for the care they give, unless they form a home care agency and provide care through that organization.
There are plans with annual limits, total dollar limits as well as unlimited plans. One can also choose daily or monthly limits and align those to specific care situations. For example, $100 / day if the individual resides at home and $250 / day if they are in a skilled nursing home.
Most policies have “elimination periods”. This is the period of time after a policy becomes active before the senior is eligible for any benefits. Typically, these are between 20 and 100 days, but some are even longer.
How to Apply
It is recommended that seniors use the services of a broker / advisor who is not tied to any one insurance provider. This eliminates some of the conflict of interest that long term care insurance salespersons may have. A salesperson might be tempted to sell a more expensive policy that does not necessarily suit a senior’s needs. Typically, there are no fees to use a broker / advisor. These individuals will be compensated by the insurance company when a policy is purchased.