What Long-Term Care Insurance Protects Against

Because long-term care can be so expensive, not to mention labor-intensive, long-term care insurance exists to protect against exhausting your personal assets or burdening your loved ones. In a sense, it’s similar to homeowners insurance, which you buy so you don’t have to come up with $300,000 to rebuild your house if it burns to the ground. Long-term care insurance also protects against having to spend down your assets to almost nothing to qualify for public assistance from Medicaid. (See also Tips for Retiring Without Long Term Care Insurance and Long-Term Care Insurance: Who Needs It?)

Even though you’ve paid taxes that help fund Medicaid for all your working years, you shouldn’t aspire to get a return on that “investment.” Medicaid is a program for people with minimal income and assets; if you have to use it, you’re in bad shape. Eligibility guidelines vary by state because Medicaid is a joint federal-state program. But to give you an idea, getting Medicaid through ACCESS Florida as an individual who is 65 or older and needs long-term care requires that your monthly income be no higher than $2,199 and your assets be no more than $2,000 ($5,000 in some cases). 

In addition, when someone else is paying for your care, you’ll have fewer choices about the type of care you receive and where you receive it.  Not all facilities accept Medicaid; others have a limited number of beds for Medicaid patients. Furthermore, depending on what Medicaid facilities are available in your area, the care you get might be of a lower quality than what an insurance policy would pay for or what you would choose if you could afford your own care. (See Medicaid vs. Long-Term Care Insurance for a closer look at the differences.)

Long-term care insurance provides a daily benefit and a lifetime benefit. The daily benefit is the maximum the policy will pay per day for your care; the lifetime benefit is the maximum the policy will pay long term. You decide how much your daily and lifetime benefit will be based on how much you’re willing to pay in premiums. A $200 daily benefit will mean that you pay higher premiums than a $150 daily benefit, and a five-year lifetime benefit will give you higher premiums than a two-year lifetime benefit.

What Long-Term Care Insurance Does and Doesn’t Cover

What is covered and what is not covered can vary somewhat by insurer, but in general, here’s what to expect.

Covered Services 

– home care

– respite care

– hospice care

– adult day care

– assisted living

– nursing home care

– skilled care from nurses and therapists

– personal care, such as help getting dressed

– occupational, speech, physical and rehabilitation therapy

– Alzheimer’s and dementia care

Not Covered 

– care for mental or nervous disorders (but some policies do cover them)

– treatment for alcohol or drug addiction (unless the addiction is to a physician-prescribed drug)

– treatment for self-inflicted injury or attempted suicide

– treatment for injuries obtained while committing a felony

– care outside the United States (but some policies offer worldwide coverage, or coverage in specific additional countries)

– care from family members who aren’t healthcare professionals (but some policies do cover family care)

– items that might make you more comfortable but that aren’t medically necessary, such as toiletries, television rental or beauty services

– incidents that are covered by other benefits, such as no-fault personal injury car insurance, worker’s compensation or Medicare

If your policy does not have a pre-existing condition limitation, it will pay if your claim is related to a condition you had before applying for the policy. 

If you develop a serious health problem or injury that requires long-term care, chances are you’d like to get care in your own home, assuming you don’t need constant access to doctors or hospital services. Policies offer varying levels of coverage for home care, so it’s important to understand what’s available and what any policy you’re considering will actually cover.

Some policies, for example, will pay a family member or friend to care for you in your home, while others specifically exclude this benefit. This particular benefit can make you more comfortable, since you’ll be getting help from someone you know instead of a stranger. It can also ease the burden of having a loved one care for you by compensating them for time they would otherwise be spending at their regular job or for essentially taking on a second job.

Some policies require that in-home providers be licensed healthcare professionals, which won’t help you if your loving daughter is an accountant. Still other policies don’t cover home care at all; these are called something like “Nursing Care and Residential Facility Only” policies, whereas a policy that includes home care might be called something like “Comprehensive Long-Term Care Insurance Policy.” Besides not paying for care you receive at home, some policies also won’t pay for care in certain types of facilities. They might cover care in a state-licensed skilled nursing facility, for example, but not an assisted living home. 

Respite care is a nice-to-have benefit included in some policies. It pays for you to receive professional care at home or in a facility while friends, family or neighbors who normally care for you at home take time off. 

Your policy ends when you cancel it in writing, fail to pay premiums as agreed, exhaust your maximum lifetime benefits or die. Long-term care insurance policies are guaranteed renewable if you pay your premiums on time; you can’t be dropped for filing a claim or getting sick. 

Next, we’ll talk about who should buy long-term care insurance and at what age.