The Basics of Long Term Care Insurance

What is long-term care insurance?  Long-term care insurance (LTCI) is an insurance product, sold in the U.S., U.K. and Canada, that helps pay for the cost of long-term health care.  LTCI policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with activities of daily living such as bathing, dressing, or eating.  You can select a range of care options and benefits that allow you to get the services you need and where you need them.

When should you consider buying long-term care insurance?  The ideal time to buy long-term care insurance is between ages 52 and 64. Those who wait longer face higher premiums and an increased possibility of being denied coverage since LTCI premiums are based on medical history and people tend to develop chronic conditions as they age, such as high blood pressure.

What are some things you should consider?

  • What is your family history? Did your parents or grandparents need long-term care?  When I look at my family I have a 50/50 chance of needing long-term care.  On my mother’s side of the family both parents needed long-term care; on my father’s side, no one required long-term care.
  • Do you self-insure? You (or your advisor) should run a retirement projection to determine if you can afford to self-pay for at least five years in a nursing home.
  • Do you plan to give your assets to your children? What happens if you put your house in your children’s names and one of them gets a divorce or has to file bankruptcy?

Do you plan to put your assets in an irrevocable trust and name someone as trustee to protect your assets?  It can be difficult to give up control of your assets when planning for long term care.

  • Do you want to be in control of your care? If you have purchased the correct long-term care insurance, you control the care you receive.   Depending on your policy and the features you choose, you decide whether you want to be taken care of in your home or you can pick the facility to take care of you.  If you don’t purchase long-term care insurance, you may not have the choice of the type of care you receive or what facility you stay with.
  • Compare policies and read all the fine print. How long is the exclusion period before the policy begins paying benefits?  What capacities must you lose?  Is it two or three?  How many years are covered?
  • Don’t keep your long-term care plans a secret. Have a conversation with your family members.  Do you want to be taken care of in your home if it is possible?  If you cannot be taken care of in your home, what facility do you want to be in? Make photocopies of the first two pages of your policy and give them to someone who is going to be responsible.  You may also need someone to advocate for you when it comes time to use the policy or file a claim, so authorize someone to speak to the company on your behalf in advance.
  • Review your long-term care plans every year.

What did I do when it comes to my personal long-term care plans?  I bought a LTC policy for my husband and myself because I want to control the type of care I receive and protect my assets for my heirs.  If I can be in my home, I want to be taken care of there.  If I can’t be in my home, I want to be in a top notch facility.  I bought a policy in my 40’s that has a 90-day wait period (90 days before benefits are issued). Our plan has a $7,200 monthly benefit (a cash benefit), which includes a shared benefit for my spouse with a combined annual premium of $4,808.

We recommend when considering long-term care insurance to speak to your financial advisor and a qualified LTCI expert before making any decisions about purchasing a policy.

Rosanne Braxton, CFP®


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