Long Term Care Insurance

Long Term Care Insurance

Long Term Care Insurance (LTCI) is insurance that covers the gap in care that is left by Medicare and standard health insurance coverage. LTCI is obtained by an individual for the purpose of paying for all or some of the services that can originate from a long or chronic illness, disability, or cognitive impairment, For example Alzheimer’s disease. The most frequently used services of LTCI are the ones surrounding Activities of Daily Living or ADLs, which include six major daily functions. The functions that are considered necessary daily activities are the following: BATHING, EATING, DRESSING, TRANSFERING, TOLETING, and INCONTINENCE. LTCI focuses on providing the right care and services based on an individual’s current condition. As the average life span continues to rise, so does the cost of elderly care such as nursing homes, assisted living, skilled care and other facilities that care for the elderly, this can put an increasingly heavy financial burden on the individual needing care and their loved ones. The largest cost involved in LTCI is custodial care, this includes assistance with personal care and/or supervision. Medicare will not pay for these services except under specific criteria. Skilled care in nursing homes requires a 3-day hospital stay, Medicare will pay for the first 20 days after that they will copay for up to 100 days, after 100 days coverage stops all together and the individual must pay out of pocket. Another option for long term care coverage is through the use of Medicaid. Medicaid covers LTCI for individuals that are in financial need or have met the state requirement for a Medicaid compliant annuity. (If assets are not protected then Medicaid has the right to recover the amount of benefits it has paid out on that individual’s behalf from the deceased estate).

Levels of care

Levels of care associated with long-term care insurance consist of the following:

Skilled nursing care- is a 24 seven care that is provided around the clock and can be performed only by a licensed nurse under a doctor’s orders.

Intermediate care- is less than around the clock care performed by a licensed nurse under doctors orders.

Custodial care- is care that aids in the activities of daily living, this can be performed by someone without medical training.

Types of care that are defined in long-term care insurance policies:

Home health care, adult day care, respite care, and assisted living facilities.

Time & Optional Benefits

Long-term care insurance benefits have a minimum of 12 months but are usually between two and five years. Some long-term care policies may include a lifetime benefit. Benefits are usually expressed as a dollar amount per day. The more the policy covers the more the premium will be. The elimination period (Time deductible) is also a determining factor and the cost of a policy.

They are optional benefits that can increase coverage such as guaranteed insurability, nonforfeiture, and inflation protection

Cost & Taxes

It is essential for individuals to purchase long-term care before they need it. Individuals may not qualify or be eligible for long-term care insurance if they are not in “insurable health.” Almost 70% of individuals over the age of 65 will need some form of long-term care insurance. Females on average need 3.7 years of coverage while men normally require it for only 2.2 years. Long-term care can cost over $100,000 a year. There are tax advantages to buying a long term care policy if the policy is tax qualified. These deductions are significant for example an individual between the age of 51 to 60 could be eligible for a Maximum deductible premium of $1690.


Ryan Begley

Benefits Specialist