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Long-Term Care Insurance

10 Things You Should Know About Buying Long-Term Care Insurance

  1. Long-Term Care is Different From Traditional Medical Care

    Someone with a prolonged physical illness, a disability or a cognitive impairment such as Alzheimer's disease often needs long-term care. Long-term care services may include help with daily activities, home health care, respite care, hospice care, adult day care, care in a nursing home or care in an assisted living facility.
  2. Long-Term Care Can be Expensive

    The cost depends on the amount and type of care you need and where you get it. 
  3. You Have Options When Paying for Long-Term Care

    People pay for long-term care in a variety of ways. These include using personal resources, long-term care insurance and Medicaid for those who qualify. Medicare, Medicare supplement insurance and health insurance you may have at work usually will not pay for long-term care. Long-term care insurance will pay for some or all of your long-term care.
  4. Decide Whether Long-Term Care Insurance is for You

    Whether you should buy a long-term care insurance policy will depend on your age, health status overall retirement goals, income and assets. For instance, if your only source of income is a Social Security benefit or Supplemental Security Income (SSI), you probably should not buy long-term care insurance since you may not be able to afford the premium. On the other hand, if you have a large amount of assets but do not want to use them to pay for long-term care, you may want to buy a long-term care insurance policy. However, you should not buy a policy if you can't afford the premium or are not sure you can pay the premium for the rest of your life.
  5. Pre-Existing Condition Limitations

    A long-term care insurance policy usually defines a pre-existing condition as one for which you received medical advice or treatment or had symptoms within a certain period before you applied for the policy. Some companies look further back in time than others. Many companies will sell a policy to someone with a pre-existing condition. However, the company may not pay benefits for long-term care related to that condition for a period after the policy goes into effect, usually six months. Some companies have longer pre-existing condition periods or none at all.
  6. Know Where to Look for Long-Term Care Insurance

    Long-term care insurance is available to you in several different forms. You can buy an individual policy from a private insurance company or agent, or you can buy coverage under a group policy through an employer or association membership. The federal government and several state governments offer long-term care insurance coverage to their employees, retirees and their families. You can also get long-term care benefits through a life insurance policy. Some states have long-term care insurance programs designed to help people with the financial impact of spending down to meet Medicaid eligibility standards.
  7. Check With Several Companies and Agents

    Contact several companies and agents before you buy a long-term care policy. Be sure to compare benefits, the types of facilities covered, limits on your coverage, what is not covered and the premium. Policies from different insurance companies often have the same coverage and benefits but may not cost the same. Be sure to ask companies about their rate increase history and whether they have increased the rates on the long-term care insurance policies.
  8. Don't be Misled by Advertising

    It is important to note that Medicare does not endorse or sell long-term care insurance policies, so be wary of advertising that suggests Medicare is involved. Do not trust cards you get in the mail that look like official government documents until you check with the government agency identified on the card.
  9. Make Sure the Insurance Company is Reputable

    To help you find out if an insurance company is reliable, you can take the following actions: Stop before you sign anything, call your state insurance department and confirm that the insurance company is licensed to do business in your state. After you make sure they are licensed, check the financial stability of the company by checking their ratings. You can get ratings from some insurer rating services for free at most public libraries.
  10. Review Your Contract Carefully

    When you purchase long-term care insurance, your company should send you a policy. You should read the policy and make certain you understand its contents. If you have questions about your insurance policy, contact your insurance agent for clarification. If you still have questions, turn to your state insurance department or insurance counseling program.

A Shopper’s Guide to Long-Term Care Insurance

Last Updated 2/9/2021

According to the U.S. Department of Health and Human Services (HHS), at least half of elderly Americans will need LTC at some point.

LTCI policies incorporate several LTC service alternatives, including:

  • Home health care.

  • Respite care.

  • Hospice care.

  • Personal care in the home.

  • Services provided in assisted living facilities.

  • Adult day care centers and other community facilities.

  • Public programs, such as Medicare and Medicaid, also cover certain limited LTC services.

As our population ages, the need for LTC support and services will increase and require innovative new approaches. You can find more on this topic and other issues related to the aging population in the presentation videos for the Center for Insurance Policy and Research’s (CIPR's) June 16, 2015, symposium Boom or Bust? A Look into Retirement Issues Facing Baby Boomers.

The decision to purchase LTCI and the premium charged may be influenced by one’s age and life expectancy, gender, family situation, health status, income and assets:

  • Age and life expectancy: The younger you are when you purchase an LTCI policy, the lower your premiums will be. The longer you live, the more likely the need for LTC.

  • Gender: Women are more likely to need LTC because, on average, they have longer life expectancies than men.

  • Family situation: If a family member is not available to provide care, then paid care, provided inside or outside the home, may be the only alternative.

  • Health status: A family history of chronic or debilitating health conditions could indicate a greater probability of requiring LTC in the future.

  • Income and assets: An LTCI policy may be used to protect accumulated assets. Some experts recommend that LTCI premiums should not exceed 5% of income.

There are several ways to purchase coverage in the LTCI market:

  • Individual policies: Most LTCI policies are purchased by individuals through insurance agents. Benefits provided by individual policies can vary among different insurers. Each insurer may also offer policies with different combinations of benefits.

  • Group policies: Some employers offer group LTCI coverage to their employees. Employer group plans generally offer a base plan of benefits with less stringent underwriting than for individual policies. Sometimes they offer enhanced benefits contingent upon additional underwriting.

  • Association Policies: Many associations let insurance companies and agents offer LTCI to their members. Benefits and underwriting for association policies are generally more like those for individual policies than for group policies.

The primary challenges for insurers and state insurance regulators in LTCI markets come from older issue year policies. These policies were initially priced when LTCI experience used to calculate rates was not fully developed. As experience developed, it became apparent that the initial pricing assumptions for the number of policyholders qualifying for LTC benefits and the length of time claimants would remain on claim were understated. Additionally, actual policy lapse rates proved to be much lower than initially assumed, resulting in higher insurer exposure to claims payments. Misestimation of initial pricing assumptions has made it necessary for insurers to increase LTCI rates to ensure their future solvency.

The analysis of decades of experience generated by older issue year policies has enabled LTCI insurers to more accurately price newer issue year policies, making rate increases to them far less likely and of a lesser magnitude.

Status: State insurance regulators are working to: 1) improve LTCI rate increase review and approval processes; 2) enhance insurer reserve adequacy; and 3) facilitate innovative product offerings.

How the NAIC Is Helping

The NAIC formed the Long-Term Care Insurance (EX) Task Force in 2019 under the Executive (EX) Committee. Its focus is on nationwide LTCI rate increase coordination and consistency. The Task Force’s goals are to:

  • Develop a consistent national approach for reviewing LTCI rates that result in actuarially appropriate increases being granted by the states in a timely manner and eliminates cross-state rate subsidization.

  • Identify options to provide consumers with choices regarding modifications to LTCI contract benefits where policies are no longer affordable due to rate increases.