Long-term care insurance can ensure you have the help you need for day-to-day living. There are three main types of long-term care insurance, and which one is best for you will depend on your circumstances.
Long-term care services typically include help with the daily activities that can become more difficult as we age or with some health conditions. These may include activities like eating, bathing, or dressing.
A long-term care insurance plan helps cover the costs of these services, which may be especially valuable for people with chronic health conditions or disabilities.
The U.S. Department of Health and Human Services estimates that more than half of older adults ages 65 years and over will require some type of long-term care.
Long-term health insurance is unlike standard health insurance. It is a special kind of plan that helps cover your long-term care needs by offering unique support and services.
Plans typically include coverage for custodial care in various settings, not just your home, but also in a community setting or a care facility. Custodial care may include help with:
- getting in and out of bed
- getting up from and sitting down in a chair
- using the bathroom
- eating
- bathing
- dressing
Long-term care plans usually reimburse you a daily amount for the services you receive, and depending on your particular plan, this may include benefits for:
- adult day care services
- help from assisted living facilities
- memory care facilities, such as those that help people with Alzheimer’s
- nursing homes
- respite care
Long-term care insurance requires a monthly premium, which can vary by plan type, plan provider, and the level of coverage required.
There are three types of long-term life insurance:
- traditional or stand-alone long-term care insurance
- long-term care insurance rider
- linked-benefit long-term care insurance
Traditional (stand-alone) long-term care insurance
This option exclusively provides coverage for many different long-term care services. These include assistance with
Plans generally cover ADLs in your own home, but they may often also include care you receive in a nursing home or assisted living facility.
Traditional plans usually have set periods in which benefits will be paid. This could be for a specific number of years up to a lifetime, with longer plans costing more in monthly premiums. Some plans also have waiting periods, known as an elimination period. An elimination period is a set number of days that you must wait before the plan will cover service costs.
Policies usually include a maximum limit, which is the most the insurance will pay per day or per month for services. Some plans may also include inflation protection, which means that the benefit amounts will keep up with rising service costs.
Traditional plans allow you to choose the level of coverage that fits your personal and financial circumstances.
Long-term care insurance rider
If you have an existing insurance policy, such as a life insurance policy, you may be able to add a rider to it. Adding a rider allows you to keep your existing plan while adding long-term care benefits to the coverage. This usually results in a premium increase.
As with traditional long-term care insurance, benefits will begin when you are unable to perform a specific number of ADLs.
If you have a life insurance policy and add a long-term care insurance rider, you may be able to use some of the final settlement amount toward the cost of long-term care services. If you end up not needing the long-term care option, the beneficiaries of your plan will receive the full original benefit amount following your passing.
Linked-benefit long-term care insurance
This is similar to a long-term care insurance rider, in that it is a benefit attached to another insurance plan. However, a linked-benefit plan is a stand-alone plan that combines life insurance and long-term care benefits from the time you purchase the plan.
If you don’t use all your long-term care benefit, the remaining amount may be paid to your beneficiaries, and there may also be a small benefit amount paid to them if you pass away.
It’s important not to wait too long before getting long-term care insurance. Insurance is there to help in times of need, but if you are already unwell or receiving care, you may be ineligible for insurance.
This is because some insurance companies use medical underwriting to decide whether to offer you a plan, whether to exclude specific conditions, or how much it will charge in premiums.
Long-term care insurance costs are based on the following:
- your age when you purchase the plan
- the total amount the plan will pay each day
- the total number of days or years that a plan will pay for
- the lifetime total that the plan will cover
- optional plan benefits that you choose, like inflation protection
Based on 2023 data from the American Association for Long-Term Care Insurance, the average long-term care insurance cost for a single, healthy 55-year-old male was $900 per year for a $165,000 plan.
The amount for a single, healthy 55-year-old female was $1,500 per year for a $165,000 plan.
Each state has its own regulations and laws around insurance. You can contact your state’s insurance department for further information about long-term care insurance and for any other state-specific insurance information.
If you feel you may need long-term custodial care in the future, it is best to consider long-term care insurance as soon as possible to ensure you get the best benefits at the most affordable rate.
There are different options to consider, such as a traditional or stand-alone plan, a rider, or a separate benefit that is added to an existing insurance plan.
If you need help or advice relating to insurance, your state insurance department can help.