Long-term care insurance (LTC or LTCI) is an insurance product, sold in the United States, United Kingdom and Canada that helps pay for the costs associated with long-term care. Long-term care Insurance covers care generally not covered by health insurance, Medicare, or Medicaid.
Long-term care (assistance beyond 100 days) is generally not covered by Medicare because it's considered custodial care and not medical care. While Medicaid does cover long-term care for millions of Americans, there's an exceptionally low income threshold to qualify. Long-term care (LTC) insurance can help retirees who don't want to spend down their assets to qualify for Medicaid afford the cost of an in-home caretaker, or a stay at an assisted-living facility, skilled nursing facility, or nursing home.
Like all other forms of insurance, once you buy an LTC policy and begin paying the monthly premium, you become entitled to the benefits.
Coverage on most LTC insurance policies kicks in once the policyholder needs help with two or more of the six Activities of Daily Living (ADLs): eating, bathing, dressing, transferring, using the toilet, and maintaining continence. Severe cognitive impairment that increases the policyholder's health and safety risk also qualifies.
Each policy has an elimination period, which states the number of days the insured must wait to receive benefits after the insurer determines they're eligible. A typical elimination period is 30, 60, or 90 days.
The amount of money the policyholder will be reimbursed for is known as the daily limit. This is outlined in the policy and usually around $150 a day or more. The insurer will continue paying the daily benefit up to a maximum number of days, typically a period between two years and 10 years, or up to a specified amount of money.
Who needs long-term care insurance?
It's difficult to know whether or not a person will need long-term care in their later years, just as it's impossible to predict whether a person will ever need to draw on the benefits of homeowners insurance or life insurance. But if you're concerned about the costs of elder care and know your own savings or help from family won't cover it, it's a good idea to get long-term care insurance.