Did you know that more than half of people reaching age 65 will need long-term care during their lives?¹

The “dream scenario” is that we live long, healthy lives and never face serious health challenges.

But the reality for most of us will be trickier than that. Thinking about what you would want if you need a lot of care ensures “Future You” maintains dignity and comfort, regardless of health.

Your older years will feel so much better if, should the need arise for long-term care (and for most of us it will), you have the confidence that you planned for this.

Many of us have had the experience of visiting someone in a depressing long-term care setting. But with good planning, Future You can focus on choosing the approach that will make your later years joyful and meaningful even if you need extra help.

3 Types of Insurance for Long-term Care Needs

There are three different types of policies that typically help pay for long-term care needs. The right one for you depends on your goals (what you care about most), financial situation (what you can afford) and health profile (what you can qualify for).

1. Traditional long-term care insurance - usually the lowest premiums per year (or month, you choose), but usually you have to pay premiums your entire life and you get nothing back if you either cancel the policy or die without needing long-term care. Additionally, the premiums are usually not guaranteed, which means they can be raised on you over time (not ideal when you’re planning for retirement).
2. Hybrid life-LTC insurance - this is often the best choice for well-off people who are able to afford higher annual premiums for 5-20 years (or make a larger one-time lump sum payment) in order to have a policy that lasts your entire lifetime. Hybrid policies usually pay out a lot if you need long term care, and if you never do, they pay your beneficiaries a death benefit that’s usually modestly more than the premiums you paid.
3. Life insurance with an LTC rider (or no rider) - some permanent life insurance policies offer optional long-term care riders, which allow you to draw down the death benefit if you need long-term care while you’re alive. This approach can make sense if you want permanent life insurance (such as whole life, universal life, etc.) but also want to draw the money for long-term care. Certain permanent insurance policies grow cash value (the value you can use while you're alive) in a way that you don't even need an LTC rider - you can simply the earmark the policy for "long-term care if I need it, legacy for people and causes I care about if I don't".

We can help you explore which type of policy is best to meet your long-term care planning goals.

How do you qualify for long-term care benefits?

First, most long-term care policies from insurance companies today have the same requirement: a doctor must certify that you are unable to perform at least 2 of the 6 “activities of daily living” or that you suffer from cognitive impairment that makes it unsafe do activities of daily living without supervision.

The activities of daily living are:

• Eating
• Dressing
• Bathing
• Transferring (e.g. moving from a wheelchair to a bed)
• Toileting (e.g. the physical aspects of moving your body onto the toilet, doing basic hygiene for yourself)
• Continence (e.g. control of bodily functions)

Occasionally, you'll come across something a little different, but this is rare. For example, the government-run long-term care program in Washington State requires that you are unable to perform 3 activities of daily living that they define.

Second, it matters what type of long-term care policy you have:

• If you have an indemnity policy then simply needing long-term care is enough to get benefits. You do not need to prove you have qualifying expenses. You simply get the money from the insurance company and you’re free to spend it on whatever you want. (plane tickets for your loved ones to visit, front-row tickets to a great show, hiring your nice stay-at-home parent neighbor to help you a few hours each day while their kids are in school are all fine)
• If you have a reimbursement policy it can be more like filing an expense report for work -- you need to demonstrate that you need reimbursement for qualified expenses. The “obvious” expenses like bills from a nursing home are certainly covered, but the plane tickets and show tickets mentioned above would not be eligible. And hiring your neighbor to provide in-home care would only be reimbursed if your neighbor happened to be licensed, which generally means working for an agency. 

Some policies are a mix of indemnity and reimbursement: a fraction of the benefit is paid to you in cash while the remainder is reimbursement-only.

If a reimbursement policy and an indemnity policy are pretty similar in all other ways, people often like the flexibility of an indemnity policy. However, sometimes people like the oversight provided by an insurance carrier with reimbursement policies, as it can help ensure that the money is truly going to cover your care needs.

What are the key choices you make when choosing a long-term care policy?

The exact choices will depend on the type of policy you are considering, but the key factors are:

1. Initial monthly benefit amount - how much you’d get each month if you had a claim shortly after getting the policy
2. Inflation adjustment - whether and by how much your initial monthly benefit amount is adjusted over time for inflation (for example, “3% compounded”)
3. Benefit period - how long you would receive benefits for while needing long-term care.
4. Definition of valid expenses - whether you choose an indemnity policy or reimbursement policy, or a mix of the two
5. Carrier - you’ll likely want this policy to be around for a long time, so picking a carrier with solid financial strength is important

Next steps

To explore your insurance options, complete our long-term care insurance questionnaire.