How Long-Term Care Insurance Works

Long-term care (LTC) insurance is a type of insurance that helps cover the costs of long-term care (LTC) services for individuals who are unable to perform certain activities of daily living (ADLs) or who have a cognitive impairment, such as dementia. These services can include in-home care, assisted living, or nursing home care.
Couple looking at Long Term Health insurance options

Without long-term care insurance, care expenses can deplete savings and assets. Understanding how long-term care insurance works is important for seniors and their loved ones when considering purchasing a policy.

When you purchase a long-term care insurance policy, you pay a premium, either on a monthly, quarterly, or annual basis. The premium is determined by a number of factors, including your age, gender, overall health, and the type of policy you choose. The younger and healthier the individual is, the lower the cost of the insurance will be. However, obtaining a policy at a younger age means that you will be paying yearly premiums for a longer period of time. Once you have a policy, you can use the benefits to pay for long-term care services.

Policy Features

There are different types of long-term care insurance policies available, but most policies have certain features in common. These can include:

  • Benefit period: This is the length of time that benefits will be paid under the policy. The benefit period can range from a few months to several years.
  • Daily benefit amount: This is the amount of money that the policy will pay per day for long-term care services. The daily benefit amount can range from a few hundred dollars to several thousand dollars.
  • Elimination period: This is the length of time that you must pay for care before benefits are paid under the policy. The elimination period can range from a few days to several months.
  • Inflation protection: This is an option that increases the benefit amount over time to keep pace with inflation.


Be Informed

It’s important to carefully review the policy and understand what is covered and what is not covered. Not all policies cover the same services. Some policies may have exclusions or limitations, such as pre-existing conditions or family health history. 

When it is time that long-term care services are required, you will need to provide proof of your need for care, such as a doctor’s statement, to the insurance company. Once the insurance company approves your claim, they will begin to pay benefits according to the terms of your policy.

It is recommended that you consult with an insurance agent or a financial advisor to determine if long-term care insurance is right for you, and which policy best meets your particular needs. Being informed can help you feel more at ease when making decisions pertaining to long-term care insurance. 

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