Few individuals are financially prepared for a health crisis that would require long term care (LTC). Government programs like Medicare and Medi-Cal can be hard to qualify for and provide only limited coverage for LTC costs.
LTC insurance can help you handle the cost of long-term care, whether it’s provided at home or in a facility. Getting a plan also helps protect assets that you might otherwise have to spend before you could qualify for Medi-Cal. But if paying the premium is a serious burden, it may not make sense to purchase a plan, which is in part meant to protect financial assets.
Generally speaking, anyone in reasonably good health can purchase a policy. There are many conditions which can make you difficult to insure at any age, so the best time to consider LTC coverage is when you are healthy. Most LTC insurance policies will cover Alzheimer’s and other cognitive disabilities. An insurance company will not issue a new LTC insurance policy to someone already diagnosed with Alzheimer’s disease or other cognitive disabilities.
Choosing an Insurance Plan
The LTC benefit payments you receive and the cost of your coverage depend on the plan you select. Before choosing a plan, consider the following features and options:
- Adequate daily benefit: Check the cost of LTC in your area and make sure the daily benefit will cover the cost. Does the policy allow you to use your total daily maximum for home care the same as for a skilled nursing facility?
- Inflation protection: You’ll pay more for a policy with this feature, but average costs are expected to quadruple by 2030.
- Flexible coverage: Does the plan cover in-home care for medical and nonmedical services as well as skilled nursing facility costs? Without coverage for nonmedical services you may not be able to stay at home, even if your policy covers in-home care. Also consider coverage for respite care, care at adult day programs, and assisted living facilities.
- Tax qualification: Most LTC policies are “tax-qualified,” meaning you don’t pay state or federal income tax on benefits.
- Eligibility requirements: Pay attention to the policy trigger, which determines if and when benefits are paid. Make sure the trigger is no more restrictive than suffering cognitive impairment or an inability to perform at least two activities of daily living.
- Elimination period: Is there a single elimination period, whether the care is in-home or in a skilled nursing facility?
Purchasing LTC insurance can be a complicated decision. Be sure to get input from multiple sources. To compare plans, use the Long-Term Care Insurance Evaluation Checklist.
The Long-Term Care Insurance Evaluation Checklist is not available as a document. We do have it as part of the Long-Term Care Insurance handout which is attached.