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How Does Long-Term Care Insurance Work? 5 Common Questions Answered

Life Insurance
A mature man smiling and walking on a bridge wonders, "How does long-term care insurance work?"

Aging is a part of life. As wonderful and unpredictable as that may be, there could come a time where you need extra help with your day-to-day activities. While it can be hard to foresee if you'll need care someday, there may be ways to help protect yourself now. Long-term care insurance may be something worth considering.

But how does long-term care insurance work? And what does long-term care insurance cover? The more you learn about long-term care now, the more prepared you'll be to weigh your options moving forward.

1. What Does Long-Term Care Insurance Cover?

Suppose there comes a time when you do need care. The Department of Health Human Services estimates that nearly 70% of those turning 65 today will need some form of long-term care, and the average time of that care is three years.

You may think you can rely on Medicare to cover these costs. But unfortunately, Medicare only pays for long-term care under specific circumstances and generally for short periods — 100 days or less — while recuperating from medical care or conditions.

If you or a loved one end up needing daily assistance with activities, such as eating, bathing and mobility, Medicare may not cover it. In that case, long-term care insurance can help to pay for the costs associated with nursing home care, assisted living facilities and home health care.

2. How Does Long-Term Care Insurance Work?

If you are no longer able to perform at least two of six activities of daily living, such as bathing, going to the bathroom and getting up from bed, or if you are diagnosed with dementia or Alzheimer's, you're eligible to make a claim for coverage.

The exact terms and length of your policy will depend on the coverage you choose. To start, you may have to pay out of pocket between 30 and 90 days before your insurer will reimburse you and start covering costs. From there, your policy will pay up to a predetermined daily limit — for example, $150 a day for nursing home coverage — until you reach the lifetime maximum. Other policies may also include a set time limit, such as three years of coverage.

Make sure you're paying attention to these details as you explore your policy options.

3. When Should I Purchase Long-Term Care Insurance?

Purchasing long-term care insurance may not cross your mind until you're approaching retirement. According to the American Association for Long-Term Care Insurance (AALTCI), most individuals who buy long-term care insurance are age 55 to 65.

However, that doesn't mean you can't purchase coverage earlier, even in your 20s. As with many types of insurance, premiums are typically lower when you're younger and healthier. Also, keep in mind that long-term care premiums may rise over time, especially as you age or develop health problems.

So, you'll likely want to weigh the benefits and costs if you are younger. While you may start with a much lower rate at 35 compared to 55, you could end up paying premiums for a longer period. However, waiting may result in higher premiums for less coverage.

4. Is Long-Term Care Insurance Tax Deductible?

There are some tax advantages associated with long-term care insurance. However, as always, there are some caveats to be aware of before you make a final decision.

If you itemize your deductions, depending on where you live, you may be able to count all or part of your long-term care insurance premiums as medical expenses. As you're exploring your long-term care options and want to investigate potential tax advantages, consider looking for policies labeled tax-qualified. Not every long-term insurance policy will have premiums that qualify as medical expenses.

If you have more questions about potential tax benefits associated with long-term care insurance, make sure you speak to a tax advisor or a financial professional.

5. How Much Does Long-Term Care Insurance Cost?

The exact cost of long-term care coverage depends on a variety of factors, including your age, health, gender and policy. It's also important to understand the costs of care in your area. Some locations may have higher daily prices for nursing homes, assisted living facilities and home health care.

According to the AALTCI, the average annual premium for a 55-year-old single man is $1,700. For a woman the same age, it's nearly $2,700. The discrepancy ties to life expectancy. Since women tend to live longer than men, they make up the majority of those who need care later in life.

While these numbers are averages, the costs can vary. If you live in a more expensive area or are in poorer health, you may find that premiums are higher. It's important to shop around as you start exploring your options to see all the price points available to you.

Life is full of the unexpected, but there are things you can do to help prepare yourself and your loved ones financially. Long-term care insurance may provide some of the coverage you or those you care about need later in life.


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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.