LONG-TERM CARE INSURANCE
What You Should Know
The median age of the United States population is at an all–time high. Adults over the age of 65 have
surpassed the number of teenagers, and people in their 50s and 60s can expect to live longer than
previous generations. As life expectancy continues to rise in the U.S., more and more Americans between
the ages of 40 and 84, especially those in their mid 50s, are preparing for their golden years by
purchasing long–term care insurance.
According to some estimates, long–term care policies cost Americans, on average, $888 per year at age
50, $1,850 per year at age 65, and $5,880 per year at age 75. On a national average, nursing home care
costs more than $51,000 a year. With costs rising with age, it is important for consumers to fully
understand long–term care insurance and when it should be purchased to best prepare them for the
What is Long–term Care?
Long–term care refers to a wide range of medical, personal and social services. You may
need this type of care if you have a prolonged illness or disability. This care may include help
with daily activities, as well as home health care, adult daycare, nursing home care or care in a
group living facility. Long–term care insurance is one way to pay for long–term care. It is designed
to cover all or some of the services provided by long–term care.
When will benefits be available?
Long–term care policies have an elimination period, which is the number of days you must
need nursing home care or home health care before your policy pays benefits. A shorter
elimination period will mean you pay a higher premium. Elimination periods may range from 0
to 180 days. In addition, a long–term care policy does not guarantee coverage unless you satisfy
certain requirements. For example, most policies require that you be unable to perform a given
number of daily living activities, such as dressing, bathing and eating without assistance.
Also, most policies have a benefit trigger for cognitive impairment. For example: as a
policyholder you can only qualify for these benefits if you are unable to pass a test assessing
your mental functioning.
How much in benefits will the policy pay?
The benefit amount usually is a daily benefit ranging from $50 to $250 per day. You may choose a
benefit period that is a specific number of days, months or years. A maximum benefit period may range
from one year to the remainder of your lifetime. It is important to ask the person selling the policy
if the benefit amounts will increase with inflation and if that coverage increases your premium.
Are there exclusions?
Every policy has an exclusion section. Some states do not allow certain exclusions. Many long–term
care policies exclude coverage for the following:
- Mental and nervous disorders or diseases (except organic brain disorders
- Alcoholism and drug addiction
- Illnesses caused by an act of war
- Treatment already paid for by the government
- Attempted suicide or self inflicted injury
Considerations before buying long–term care insurance
Whether you should buy long–term care insurance depends on your age and life expectancy, gender,
family situation, health status, income and assets.
- Age and Life Expectancy: The longer you live, the more likely it is that you will need
long–term care. The younger you are when you buy the insurance, the lower your premiums will be.
- Gender: Women are more likely to need long–term care because they have longer life expectancies
and often outlive their husbands.
- Family Situation: If you have a spouse or adult children, you may be more likely to receive
care at home from family members. If family care is not available and you cannot care for
yourself, paid care outside the home may be the only alternative. Different policies may
cover different types of long–term care. It is important to buy a policy that will cover
the type of care you expect to need and will be available in your area.
- Health Status: If chronic or debilitating health conditions run in your family, you
could be at greater risk than another person of the same age and gender.
- Income and Assets: You may choose to buy a long–term care policy to protect assets you have
accumulated. On the other hand, a long–term care policy is not a good choice if you have few
assets or a limited income. Some experts recommend you spend no more than five percent of
your income on a long–term care policy.
Do you qualify for Medicaid?
As an older adult, you may qualify for Medicaid, which pays almost half of the nation’s long–term care
bills. To qualify for Medicaid, your monthly income must be less than the federal poverty level, and
your assets cannot exceed certain limits. Medicaid will cover you only in Medicaid-approved nursing
homes that offer the level of care you need. Under certain circumstances, Medicaid will pay for home
Key points to remember
- Long–term care insurance policies cover a wide range of medical, personal and social services.
- Understand what must happen for a policy to begin paying benefits.
- Understand the elimination period.
- Understand the daily benefits provided.
- Understand your coverage and exclusions.
- Match your need for long–term care with your need to protect assets and your ability to pay premiums.
- Understand how much your premium will be and how often it must be paid.
- Your premium may increase after your purchase.
The Web site for the National Clearinghouse for Long–term Care Information features a number of
resources to help individuals start the planning process, including interactive tools such as a
savings calculator, contact information for a range of programs and services, and real-life
examples of how individuals have planned successfully for long–term care.
The Clearinghouse was authorized by the Deficit Reduction Act of 2005, which mandates that they
provide the following: objective information to help consumers decide whether to purchase
long–term care insurance or to pursue other private market alternatives that pay for long–term
care; information about states with long–term care insurance partnerships under the Medicaid
program; and information about the availability and limitations of coverage for long–term care
under the Medicaid program.
For more information, contact the
Centers for Medicare and Medicaid Services
or the Mississippi
Insurance Department at 1-800-562 2957.
The National Association of Insurance Commissioners
Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners
(NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50
states, the District of Columbia and the five U.S. territories. The NAIC's overriding
objective is to assist state insurance regulators in protecting consumers and helping
maintain the financial stability of the insurance industry by offering financial, actuarial,
legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC
is the oldest association of state officials. For more than 135 years, state-based insurance
supervision has served the needs of consumers, industry and the business of insurance
at-large by ensuring hands-on, frontline protection for consumers, while providing insurers
the uniform platforms and coordinated systems they need to compete effectively in an
ever-changing marketplace. For more consumer information visit