What does long-term care insurance cover?
Many medical insurance plans cover short-term skilled nursing and rehabilitation, so it’s logical to assume they’d also cover maintenance care or long-term nursing home care. But that’s not usually the case.
Advanced care can be quite expensive, and added financial stress is a burden no one should have to cope with while navigating health concerns.
That’s where long-term care insurance can step in. Long-term care insurance provides coverage for those who can no longer perform at least two activities of daily living, also known as ADLs, without help from another person.
Before we dive in much further, we should mention that this article is intended to be an overview only. Every long-term care insurance policy and the coverage it offers will differ based on the unique qualities of each policyholder. Be sure to ask your carrier and ask any retirement community you’re considering how your coverage will integrate in a senior living scenario.
In general, long-term care insurance covers the following:
- Help with ADLs: walking, transferring, feeding, dressing, grooming, bathing, toileting
- Memory care services associated with dementia, including Alzheimer’s disease
This coverage applies whether you’re receiving care at home or in a nursing home, assisted living facility or adult day care center.
Will long-term care insurance cover assisted living costs?
Some long-term care insurance policies do cover assisted living.
To be covered under most long-term care insurance policies, an assisted living facility must be staffed by an RN at all times, which is not universally the case.
You don’t want to be stuck in a position where you’ve paid for an insurance policy you can’t use — because there isn’t an RN on staff, for example — so be sure to ask the sales team plenty of questions about how they staff and how your policy will dovetail with their services.
Remember: Each person’s policy is unique! Read your contract carefully and ensure you understand all the terms and conditions.
Your long-term care insurance premiums may be tax deductible even before you need to use the policy.
If you itemize your deductions and your total medical spending exceeds 7.5% of your adjusted gross income, you’re likely eligible for a deduction.
Keep a record of your payments along with receipts for all other unreimbursed medical expenses, and always clarify any questions with your tax professional.
What to consider when evaluating long-term care insurance
If you’re considering a senior living option like a Continuing Care Retirement Community (CCRC) or Life Plan Community, you may be able to access the care you need even without a long-term care insurance policy.
If that’s not in your plans, there’s a lot to learn about the LTC landscape before you consider purchasing a plan — even if you don’t think you’ll need to use your policy for several years.
Your future self will thank you.
The benefits payment model of your insurance plan can make a huge difference in how much of your service is covered. As always, consult with an expert to determine which is better for your situation and understand what will be covered.
All policies fall under two main categories: reimbursement and cash indemnity.
The reimbursement payment model is the most common type of policy offered. These plans pay for qualifying billed expenses up to the maximum benefit listed on the policy.
For example, if the total cost of your long-term care bills is $5,000 for a month, and your policy benefit covers $4,000, you would receive $4,000.
Your receipts are important records, so keep them safe, and be aware that some expenses may be denied.
Cash indemnity plans allow the insured to spend money (up to the cost of the benefit) at their own discretion as soon as they qualify.
Policyholders can receive care from any provider as long as it's approved by their primary care doctor and part of an established care plan that the carrier has approved.
With this plan, you would receive money no matter how much you actually spend — which can be helpful as medical costs ebb and flow month to month. As an added bonus, there’s no need to hang onto all those receipts!
Annual increases in medical prices often exceed 4.5 percent, so policy benefits that were adequate one year may not be sufficient the next.
Inflation riders can protect against these increases by offering an additional benefit (on top of the policy’s original monthly benefit) that accounts for inflation.
You can typically also lock in your benefits for a specific number of years. As a rule, the longer your benefit period lasts, the more you will pay for your premium.
Because long-term care insurance policies cover ongoing daily care, underwriters consider morbidity — not mortality — in determining whether to approve a policy.
That means someone living with a chronic illness may find it more challenging to obtain long-term care insurance than someone who has dealt with and recovered from an acute condition.
The longer you wait to apply for long-term care insurance, the higher your chance of experiencing health issues that could increase your premiums or prevent you from getting covered altogether.
If you’re looking to have a plan in place for future care, should you need it, it may make sense to pursue long-term care insurance.
There are other options to secure access to future care, including Continuing Care Retirement Communities like Vi at Palo Alto.
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