Understanding Long Term Care Insurance
Long term care insurance helps cover the cost of care when you can no longer perform everyday activities independently. Learn about your options and find the right coverage for your situation.
What Is Long Term Care?
Long term care refers to a range of services and support you may need when you're unable to care for yourself due to aging, chronic illness, disability, or cognitive impairment. This care can be provided at home, in the community, or in a facility.
Medicare and traditional health insurance typically don't cover long term care services. That's where long term care insurance comes in—providing financial protection for these often substantial costs.
Home Care
Receive care in the comfort of your own home from professional caregivers.
Facility Care
Nursing homes, assisted living, and memory care facilities.
Adult Day Care
Supervised care programs during daytime hours for social interaction and activities.
The Cost of Long Term Care
Long term care costs continue to rise each year. Here's what you might expect to pay in 2024:
$6,000+
per month for home care
$5,500+
per month for assisted living
$9,500+
per month for nursing home
70%
of people will need care
Types of Long Term Care Coverage
There are several ways to fund long term care. Explore each option to find the right fit for your needs, budget, and health situation.
Traditional Long Term Care Insurance
Stand-alone policies designed specifically for LTC
Traditional LTC insurance is a dedicated policy that pays benefits when you need long term care services. You pay monthly or annual premiums, and when you qualify for benefits (typically by being unable to perform 2 of 6 activities of daily living), the policy pays a daily or monthly benefit.
Hybrid Long Term Care Insurance
Life insurance + LTC benefits combined
Hybrid policies combine life insurance with long term care benefits. If you need care, the policy pays for it. If you never need care, your beneficiaries receive a death benefit. This eliminates the "use it or lose it" concern of traditional policies.
Short Term Care Insurance
Coverage for recovery and temporary care needs
Short term care (STC) insurance provides coverage for a limited period—typically 6 to 12 months. It's ideal for recovery from surgery, illness, or injury, and often has simpler underwriting than traditional LTC policies.
LTC Annuities
Tax-advantaged care funding from existing assets
LTC annuities allow you to reposition existing assets (like CDs or savings) into a product that provides long term care benefits with potential for growth. Withdrawals for qualified care expenses are generally tax-free.
How Do Benefits Get Triggered?
Most LTC policies require you to meet one of these criteria to receive benefits:
Activities of Daily Living (ADLs)
You need assistance with at least 2 of 6 daily activities:
- Bathing
- Dressing
- Eating
- Toileting
- Transferring (moving in/out of bed)
- Continence
Cognitive Impairment
You require substantial supervision due to cognitive decline, such as:
- Alzheimer's disease
- Dementia
- Memory loss affecting safety
- Disorientation
A licensed healthcare practitioner must certify the need for supervision to protect you from threats to health and safety.
Compare Your Options
Each type of coverage has unique advantages. Here's a quick comparison to help you decide:
| Feature | Traditional | Hybrid | Short Term | Annuity |
|---|---|---|---|---|
| Benefit Period | 2-6+ years | 2-6+ years | 6-12 months | Varies |
| Premium Stability | May increase | Guaranteed | May increase | Single pay |
| Death Benefit | No | Yes | No | Yes |
| Underwriting | Full | Moderate | Simplified | Simplified |
| Best For | Maximum coverage | Asset protection | Recovery care | Tax efficiency |