A side portrait of an older adult man wearing a hat. The sunrise is behind him.

Long-term care insurance can help older adults pay for personal care services.

Adults should consider having long-term care insurance so that as they age, they can cover senior care services that traditional health insurance may not. These policies reimburse and cover care for older adults in various ways and settings, such as helping them cope with chronic illnesses or receiving senior care services. Here are the basics of long-term care insurance and how older adults can plan.

What does long-term care insurance cover?

Long-term care insurance is a type of insurance policy that helps individuals prepare for long-term care they might need. This type of insurance covers various services for adults with medical and non-medical needs caused by aging, disabilities, or chronic illnesses. Insurance will cover the cost of care if the individual cannot perform two out of six activities of daily living on their own:

  • Bathing.

  • Dressing.

  • Eating.

  • Toileting.

  • Caring for incontinence.

  • Transferring. 

Additional coverage can include 

  • Adult daycare.

  • Transportation.

  • An ongoing care facility (nursing home, assisted living residence, senior living community).

How does long-term care insurance work?

Those interested in long-term care insurance can apply by filling out an application with a provider and answering health-related questions. As a part of the application process, applicants may need to provide insurers with their medical records. Applicants can choose the coverage they want, with policies typically capping out at the amount paid daily or during an entire lifetime. 

Once the insurer approves and issues the policy, the insured will begin paying coverage. When a person needs to make a claim, their insurance provider will review their medical documents and determine their care plan. In some cases, the insurer may send a doctor or a nurse to do an evaluation. ElderLife Financial Services can help individuals make a claim on their long-term care insurance to fund senior care.

Three types of long-term care insurance

Here are the three types of long-term care insurance:

Traditional (stand-alone) policies

Traditional long-term care policies work similarly to auto or home insurance. The insuree pays premiums while the policy is in effect and will make a claim when they need covered services. These policies will state how much care a person can receive daily or monthly from a certain number of years to a lifetime maximum. The amount paid will determine the amount of care provided. 

The individual typically receives these care services in a home, nursing home, or medical facility. Those insured will pay extra for benefits that increase over time to protect them from inflation.

Hybrid policies

A hybrid or linked-benefit long-term care insurance policy offers combined coverage with additional benefits such as life insurance or an annuity. The policyholder pays a lump sum or divides it into regular payments for the long-term care coverage. The policyholder’s beneficiaries will receive some of the death benefits should the long-term care benefits go unused. These policies are more expensive than standalone long-term care policies.

Continuing Care Retirement Community package policies

A Continuing Care Retirement Community (CCRC) is a retirement community that provides one of at least three options of care: independent living, assisted living, and skilled nursing care. Long-term care insurance can cover the cost of assisted living and nursing home care.  Older adults can register for CCRCs through their long-term care insurance to gain coverage.

How much does long-term care insurance cost?

Many factors impact the price of long-term care insurance and some tax benefits you can reap from purchasing a long-term care insurance policy. 

Factors that determine long-term care insurance cost:

  • Your age and health: The older you are, the more likely you are to have health problems, increasing how much you’ll pay when buying a long-term care policy.

  • Gender: In most insurance policies, women may pay more than men, as they have a greater life expectancy and a higher chance of making more insurance claims.

  • Marital status: Insurance premiums are lower for married people than for single people.

  • Insurance company: Different insurance agencies will offer higher or lower prices and cover different levels of care. Research and compare quotes when considering policies.

  • Amount of coverage: Insurance plans that cover more services will cost more, such as higher limits on daily and lifetime benefits, cost-of-living adjustments, shorter elimination periods, and fewer restrictions on the types of care covered.

Is long-term care insurance tax deductible?

Long-term care insurance can be tax deductible. The federal government and some state tax codes allow policyholders to count a portion or all of their insurance premiums as medical expenses, which can be tax deductible if they meet a certain threshold. The limit on how much of the premium can be deducted increases with age.

Is long-term care insurance worth it?

A long-term care insurance policy can protect a person’s savings from being depleted by paying for care out of pocket. Paying for long-term care yourself can defund retirement savings quickly, leaving no money left over for alternatives.

Having a policy also gives those insured better access to quality care. Those who rely on Medicaid have more limited options than long-term care policyholders who get coverage through their insurance.

How can I buy long-term care insurance?

There are a number of reputable long-term care insurance providers. A person can purchase a long-term care insurance plan through an insurance company or agent. Some employees may be able to buy a policy through their job, as employers may offer coverage through a group rate.

[Read more: Top Long-Term Care Insurance Providers]

When can I buy long-term care insurance?

Before purchasing long-term care insurance, consider these factors to determine whether you’re ready: 

  • Current financial condition and financial goals.

  • Age and health, including pre-existing conditions.

  • Other insurance options that might be a better fit.

  • Amount of coverage needed.

What disqualifies me from long-term care insurance?

Insurance providers may deny Individuals coverage. A person with a specific pre-existing health condition may not qualify for a long-term care policy. Insurance agencies also need proof of income or finances to confirm the individual meets the income minimum and has enough savings. 

Are you considering investing in a long-term care plan? The financial concierges at ElderLife Financial can provide guidance and show you your options for long-term senior care. ElderLife Financial can also help you make a claim on your long-term care insurance policy to access the money you need. Contact us today to learn how we can support you.