Most long-term care is help with everyday activities, and that kind of care isn't covered by regular health insurance or by Medicare1. Long-term care insurance was created to fill that gap.
This guide explains what these policies cover, how benefits are triggered and paid, what to look for if you're buying one, and how to use a policy your parent already has. Policies differ a lot, so always read the specific contract.
What long-term care insurance covers
Long-term care insurance is designed to cover long-term services and supports, including personal and custodial care, in settings such as the home, a community program or a facility2. Depending on the policy, that can include:
- Home care, including help with bathing, dressing and meals.
- Adult day care.
- Assisted living and memory care.
- Nursing home care.
- Respite care to give family caregivers a break.
- Hospice care, and sometimes care coordination.
Many policies don't pay family members to provide care, even during or after the waiting period3. Check your policy's list of covered services and providers carefully.
How benefits are triggered
A policy starts paying when the insured person meets its benefit trigger. The most common is being expected to be unable to do two activities of daily living without help for 90 days. Most policies list six: bathing, continence, dressing, eating, toileting and transferring (getting in or out of a bed or chair)3.
Policies also usually pay when someone has a severe cognitive impairment, such as from Alzheimer's disease, that requires supervision. Unlike Medicare's skilled nursing benefit, today's policies generally don't require a hospital stay first3.
How benefits are paid
- Daily or monthly maximum. Policies reimburse up to a set amount per day or month for covered services2.
- Benefit period or lifetime maximum. Policies may pay for a set number of years, often two to five, or up to a total dollar pool. Very few pay without limit2.
- Elimination period. A waiting period, often 20, 30, 60, 90 or 100 days, during which you pay for care yourself before benefits start3.
- Reimbursement or cash. Most policies reimburse actual costs up to the limit. Some pay a fixed cash amount.
- Shared care. Some couples' policies let both spouses draw from one pool of benefits3.
Using a policy your parent already has
- Find the policy. Look through files and bank statements for premium payments. Ask a financial adviser or the employer if it was a group plan.
- Read the key terms. Find the benefit trigger, covered settings, daily or monthly maximum, elimination period, lifetime limit and any inflation protection.
- Call the insurer. Ask how to start a claim, what forms are needed and whether the care you're considering is covered.
- Get an assessment. The insurer will usually need a doctor's statement or its own assessment that the trigger is met.
- Keep paying premiums. Many policies waive premiums once benefits begin, but check. Don't let a policy lapse during a claim.
- Keep records. Save invoices and care notes from the provider, and track the elimination period.
If you're thinking of buying a policy
Premiums depend on age when you buy, the daily maximum, the number of years covered, and options such as inflation protection2. Most individual policies require medical underwriting, so people in poor health or already needing care may not qualify2.
- Shop while healthy. Buying younger usually means lower premiums and a better chance of approval.
- Think about inflation. Care costs rise over time, and benefits that don't grow may cover less later.
- Ask about premium history. Insurers can raise premiums. Ask for the company's rate increase history2.
- Consider nonforfeiture options. A nonforfeiture benefit gives you some value if you later drop the policy3.
- Compare hybrid policies. Some life insurance or annuity products include long-term care benefits. They work differently, so compare them side by side3.
The NAIC's shopper's guide is a free, detailed resource. Your state insurance department and SHIP counselors can also answer questions4.
Partnership policies and Medicaid
Many states offer long-term care partnership policies. If you buy a qualifying partnership policy and later need Medicaid, most states let you keep income and assets equal to the amount the policy paid out, rather than spending them down3. Rules vary by state, so ask your state insurance department or Medicaid office.
Medicaid itself covers nursing home care and, in many states, some home and assisted living care for people who qualify. Our guide to Medicare vs. Medicaid for long-term care explains how they differ.
Federal and employer group plans
Some employers and associations offer group long-term care insurance, which may not require medical underwriting2. The Federal Long Term Care Insurance Program for federal employees, retirees and their families suspended new applications in December 2022; existing enrollees keep their coverage5.
Tax treatment
Premiums for a qualified long-term care insurance contract can count as medical expenses for people who itemize deductions, up to a limit that depends on age. IRS Publication 502 explains which premiums and long-term care services count6. A tax professional can tell you how benefits you receive are treated.
If there's no policy
Most families don't have long-term care insurance. Other ways to pay include savings and income, home equity, VA benefits for eligible veterans and survivors, and Medicaid. See our guides to paying for senior living, VA Aid and Attendance and assisted living costs.
