Long Term Care Insurance

A long term care insurance policy can help pay for assistance with activities of daily living such as bathing, eating, and dressing, as well as skilled nursing care or rehabilitation, either in a nursing facility or at home. These policies have several different options in paying for facilities, home health care and even informal care provided by friends or family.

Long term care can get expensive but compared to paying for care – it can be a good value. Because the premium is based upon age and health, it’s best to lock into lower rates when you are younger. Additionally, insurance companies are under no obligation to offer you coverage so you may not be able to find a policy if you have a pre-existing health condition.

Here are a few standard elements of any policy:

  • 30 day refund policy – you can cancel the policy within 30 days for a full refund.
  • Benefit limits - The length of time (such as 3 years or lifetime) and maximum amount of coverage (such as $200,000) the policy will provide for.
  • Benefit triggers – the events that must occur in order for benefits to kick in. This is when you need help with at least two activities of daily living [rollover: activities of daily living are defined as basic self-care functions including bathing, grooming, dressing, toileting, eating, and transferring in and out of beds and chairs.], your memory declines such that you need assistance or you need help for a medical reason.
  • Caregiver respite care – pays for when a family caregiver needs to leave the home or needs a break.
  • Guaranteed renewability – the insurance company cannot cancel your policy for any reason as long as you pay your premiums.
  • Lapse prevention – If you miss a payment or two due to a cognitive or physical impairment, you have up to six months to catch up and reinstate the policy.
  • Waiting or elimination periods - The number of days you must be disabled or incapacitated before the benefit begins.
  • Waiver of premium – After you become disabled, your premium is waived.

In order to buy a policy, first check to see if your employer offers long term care coverage as a benefit. Next, ask an agent or broker for a quote. Accountants and other financial planners may be able to recommend a good agent or broker. Compare polices to find the one that’s right for you – you can use our checklist.

When comparing policies, many people find the following policy features especially important:

  • No exclusions for pre-existing conditions
  • Ability to downgrade without premium increase
  • Insurance carrier’s high financial rating
  • Inflation protection – generally this is an additional rider that protects your daily benefit amount by increasing with the pace of inflation. It may be based upon different inflation rates (consumer price index versus medical costs) and you can usually select simple or compound protection. The older you are, the less you need to worry about this option.
  • Non-forfeiture benefit - If you stop paying your policy, you may still be able to receive some of the benefit from previously paid premiums.
  • Restoration of benefits – Most plans have a maximum limit they will cover. With this rider, if you recover from an illness or injury where you drew upon benefits, the full maximum is restored.


Advantages Disadvantages
Covers some or most of the different types of long term care services, including custodial or personal care. Monthly premiums can get expensive particularly for older adults. You might not be able to continue to pay the monthly premium.
Lets you choose the type of coverage and customize your care based on your needs. You will have greater control over how, where, and by whom long term care is provided. You can’t predict exactly what kind of care you or your loved ones will need. Even if you buy long term care insurance, you may have to pay additional long term care costs.
Your family or friends won't have to worry about how your long term care will be funded. You may reduce the burden on family members when you need care. You might not be able to purchase a long term care insurance policy due to an existing health problem. (This may not apply when enrolling in coverage with your employer during predetermined specific times.)
By enrolling in your company’s benefit, you can take advantage of group rates that may be lower than individual rates.  
You’re less likely to need to use your savings or life insurance to pay for your healthcare needs, thereby protecting your retirement assets and those of your spouse.