Long Term Care Insurance

What is Long-Term Care Insurance?

Long-term care insurance has a relatively short history compared to other types of insurance products. It began in the early 1970s, following the establishment of Medicare and Medicaid in 1965. The first long-term care insurance policies covered care only in nursing homes. They were primitive by today’s standards. Such policies were designed using the Medicare model of eligibility for benefits. For example, prior hospital stays were required in order to receive benefits. Over time, policies have evolved to provide easier qualification, payment for more diverse services, and benefits lasting for longer periods of time. The majority of policies today are tax qualified, providing added incentives from the federal government to purchase long-term care insurance.

Why Do People Buy Long-Term Care Insurance?

Various surveys of people who purchased long-term care insurance indicated five main reasons why they bought:

  1. Peace of Mind – The peace of mind offered by quality long-term care insurance is immeasurable. Long-term care insurance offers truly affordable protection and alleviates a large degree of worry for many seniors.

  2. Asset Protection – Life savings are easily wiped out by rising nursing home costs. Most people would rather their home, life savings, and other assets go to their family or charity, instead of going to a nursing home.

  3. Burden – Most Americans don’t want to be a burden on their spouse or relatives. And because the burden is frequently both financial and emotional, it is incredibly harmful.

  4. Quality Care Access – The quality of care under Welfare or Medicaid plans is often far substandard to private facilities. As well, high quality nursing homes tend to favor private pay patients for admissions. Private pay coverage can give a family freedom of choice.

  5. Independent Choice – Americans are used to making choices for themselves. With Medicaid, that freedom of choice is lost, along with personal assets.

What Constitutes a Good LTCI Policy?

The following questions can help guide your customers through the process of evaluating various long-term care insurance policies:

  • What levels of care are covered by this policy? Skilled? Custodial? (Note that some older policies that cover only skilled care would not cover custodial services unless skilled care was received first. New policies must cover all levels without any prerequisite.)
  • Which facilities are covered under the policy? Any licensed facilities?
  • Does the policy provide home care benefits? At what percent of the daily or monthly benefit maximum?
  • Are homemaker services covered? If so, how?
  • Can personal care be given by home health aides? Does the aide have to come from an agency, or can I hire an independent contractor?
  • Does the policy pay for care in adult day care facilities? Assisted living facilities? Other settings? How are these defined? Do they match what is available in the area and local licensing codes?
  • How much will the policy pay per day for home care? Assisted living facility care? Adult day care? Alzheimer’s facilities?
  • What is the length of the benefit period I should consider?
  • What are the benefit triggers of this policy?
  • When do benefits start?
  • Are the waiting periods for home care cumulative or consecutive? Are the days counted on a service or calendar basis?
  • What inflation protection is best for me to keep up with the rising costs of long-term care?
  • Am I allowed to buy more coverage? When? How much?
  • Do benefits increase automatically?
  • Is there a waiver of premium go into effect? Is that different for home care?
  • Is the policy tax-qualified?
  • Is there a discount for couples or domestic partners if both individuals buy policies? What if only one is approved?
  • Can the policy for me as an individual be shared with someone in my household or family, and is there a joint policy available (one owner)?
  • How much can I afford to pay for my long-term care insurance policy? Can I pay annually? Is monthly automatic bank withdrawal available?
  • If I have good health, is there an additional discount?


The information above is reprinted from Working with Seniors: Health, Financial and Social Issues with permission from Society of Certified Senior Advisors® . Copyright © 2009. All rights reserved. www.csa.us