What is long term care insurance

Long-term care insurance, or LTC insurance, is an insurance policy that will provide financing in the event the policy holder needs nursing home care, home-based health care, or adult day care. Typically a policy will cover these needs for individuals above the age of 65 or who have a chronic condition or a disability requiring constant supervision. LTC insurance coverage is more flexible and provides significantly more options than the usual public assistance program.

LTC insurance payouts are based around the inability of an individual to engage without assistance in six basic Activities of Daily Living, or ADLs: eating, bathing, dressing, using the bathroom, being ambulatory, and continence. An individual's ability (or lack of it) to perform ADLs is important for determining what type of long-term care insurance she'll need. Most of the time, when someone can't perform two or more of the ADLs, they'll be deemed to need some kind of professional long-term care.

The reason that LTC insurance policies began to be developed in the last 20 years is due to two factors. First of all, long-term care is usually extremely expensive. The average cost for one person to stay in a nursing home for one year in the United States is $80,000. In-home custodial care can still cost in excess of $10,000 annually. Secondly, nearly half of all Americans over the age of 65 will sooner or later need LTC, typically nursing home care. Although over half of that number will only stay in the nursing home for less than a year, nearly 25% will be there for a long time (more than a year).

long term care insurance policies are often likened to a "pot of dollars", and this pot has its limits. The LTC policy will cover only a specific dollar amount for each day the insured individual resides in a nursing facility, or it will finance a certain amount for each custodial home care visit, and depending on what amount of premiums you can or are willing to pay there may be a "lifetime limit" on how much the policy will pay out as a grand total. This is why when you are considering an LTC insurance policy you need to read the policy's terms, conditions, and limitations carefully and compare the benefits to determine which policy will best address your personal circumstances.

Most LTC insurance providers do offer policies that can also provide some financing for "alternative care", such as the need to build a wheelchair ramp for one's home.

It's important therefore to realize that LTC insurance is not the same thing as health insurance. LTC policies only cover very specific circumstances. For instance, if an individual needs prescription medications but can perform five or all six of the ADLs, LTC insurance is not going to pick up the prescription tab.

Most Long term care insurance policies can't be underwritten on people under the age of 40, and likewise most insurers don't offer LTC policies to people who are already 80 or older. As with all insurance, the younger you are when you take out the coverage the lower your premiums for a given policy. And, as with all insurance policies, pre-existing medical conditions won't be covered and if you are already debilitated enough that you need LTC you won't be able to get the insurance.

Insurance professionals call the tendency of people who already have something wrong with them to then seek insurance coverage "adverse selection", and were they to cover this they would all be put out of business. Insurance policies by their definition have to be in place PRIOR TO their being needed, and long-term care insurance is no exception.