Long-term Care Insurance
Long–term care insurance is different from medical care, because it generally helps you to live as you live now instead of improving or correcting medical problems. People often think of long-term care as strictly nursing home care. Long-term care services actually may include help with activities of daily living, home care, respite care, hospice care, or adult day care. This care maybe given in your own home, a day care facility, assisted living facility, nursing home, or in a hospice facility.
FAQ & Questions
Questions? We’ve got you covered.
What is long-term care insurance?
These are individual insurance policies that may help you when you are unable to take care of yourself due to prolonged illness or disability. This policy usually pays for skilled, intermediate and custodial care in a nursing home. Home health care, adult day care, and assisted living care are also often covered. These policies usually pay a fixed amount per day or per visit to facilities or caregivers that are licensed by the state and/or participate in Medicaid and Medicare.
How much does long-term care cost?
Long-term care can be expensive. The cost depends on the amount and type of care you need and where you get it. Below are some average annual costs for care in a nursing home, an assisted living facility and your own home. Long-term care may cost more or less where you live.
Nursing Home Costs
In 2018, the national average cost of nursing home care was about $89,297 per year (for a semi-private room). This cost doesn’t include items such as therapies and medications, which could greatly increase the cost.
Assisted Living Facility Costs
In 2018, assisted living facilities reported charging $4,000 a month (for a onebedroom unit) on average, or $48,000 per year, including rent and most other fees. Residents may pay more for additional care.
Home Care Costs
In 2018, the cost of basic home care averaged $22 per hour for a home health aide in the U.S. That’s $34,320 per year for a home health aide who visits six hours a day, five days a week. Skilled care from a nurse in your home is typically more expensive. Annual costs for home care depend on the number of days a week the caregiver visits, the type of care required and the length of each visit. Home care can be unaffordable for many if round-the-clock care is required. These costs are different across the country. Your state insurance department or the insurance counseling program in your state may know the costs for your area.
How can I pay for long-term care?
People pay for long-term care in different ways. These include individuals' or their families' personal resources, including savings, investments or other assets such as a home, longterm care insurance and some help from Medicaid for those who qualify. Medicare, Medicare supplement insurance, or your employee or retiree health insurance usually will not pay for long-term care.
Medicare does NOT cover long-term care. However, Medicare Part A does cover skilled nursing facility care, nursing home care (as long as custodial care isn’t the only care you need), hospice care and limited home care. You should NOT count on Medicare to pay your long-term care costs.
Medicare Supplement Insurance
Medicare supplement insurance (Medigap) is private insurance that helps pay for some of the gaps in Medicare coverage, such as hospital deductibles and physician charges greater than Medicare approves. Medigap usually doesn’t pay for long-term care.
Medicaid is the government-funded program that pays for nursing home care only for individuals who are low income and have spent most of their assets. Medicaid pays for nearly one-third of all nursing home care in the U.S., but many people who need long-term care never qualify for Medicaid assistance. Medicaid also pays for some home- and community-based services. To get Medicaid help, you must meet federal and state guidelines for income and assets. Many people start paying for nursing home care out of their own money and "spend down" their income and assets until they’re eligible for Medicaid. Medicaid then may pay part or all of their nursing home costs. You may have to use up most of your assets paying for your long-term care before Medicaid is able to help. You may be able to keep some assets and income for a spouse who stays at home. Also, you may be able to keep some of your assets if your long-term care insurance is approved by a state as a long-term care insurance partnership policy.
State laws differ about how much income and assets you can keep and still be eligible for Medicaid. (Some assets, such as your home, may not keep you from being eligible for Medicaid.) However, federal law requires your state to recover from your estate the costs of the Medicaid benefits you receive, subject to certain rules. Contact your state Medicaid office, state office on aging, or department of social services to learn about the rules in your state.
What is the difference between a tax-qualified and a non tax-qualified plan?
Benefits paid by a tax-qualified long-term care plan generally are not taxable as income. Benefits from a non tax-qualified long-term care plan may be taxable as income. Check with your tax advisor about the possibility of deducting a portion of the premiums paid in addition to the individual tax consequences involved.
Ask these questions before you buy.
- Do you have any serious health issues?
- What is your financial situation?
- Where would you prefer to live if you could no longer care for yourself?
- Who do you trust to make decisions for you should you become incapacitated?
- What are your end-of-life wishes?
Tips & Tools
Be prepared before you buy.
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.
Long-Term Care Can be Expensive
The cost depends on the type of care provided. In 2017, the U.S. average for nursing home care was $82,125 per year. In assisted living facilities it was $43,435 per year. Home health care is priced hourly at approximately $21 per hour, per home health aide.
You Have Options When Paying for Long-Term Care
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.
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. Premiums are expensive. If your only source of income is a Social Security benefit or Supplemental Security Income (SSI), you probably are not suited to buy long-term care insurance. On the other hand, if you have means to pay premiums and assets you wish to protect, a long-term care insurance policy may be right for you.
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 limitations or none at all.
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. Check with your state insurance department or counseling program to see if these policies are available in your state.
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.
Don’t be Misled by Advertising
Most celebrity endorsers are professional actors paid to advertise, not insurance experts. It is also 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.
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.
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 senior insurance counseling program.
Need help navigating long-term care?
Long-Term Care Insurance Buyer’s Guide
NAIC’s Long-Term Care Insurance Buyer’s Guide provides you information to make better informed decisions around purchasing long-term care insurance. Download the Long-Term Care Insurance Buyer’s Guide to get a better understanding of long-term care insurance products.