What is Long Term Care Insurance?

Long Term Care Insurance is a contract between you and an insurance company that transfers some or all of the financial risk of Long Term Care costs to the insurance company. When you buy a Long Term Care Insurance policy you are actually buying a "Pool of Money", the insurance company's money, to pay for your Long Term Care needs. This "Pool of Money" is also sometimes called the Maximum Lifetime Benefit. The amount of money you can take out of your "Pool of Money" is called the Daily Benefit Amount (DBA) and can vary depending on what setting you receive your care in (for example, a policy might pay up to $200 per day for care in a Nursing Home and 50% of that ($100) for Home Care.

How long your Long Term Care Insurance Plan will pay for care is dependent on how large your Pool of Money is and how much money you take out each day to pay for your care. For example, let's say that Jane has a Long Term Care Insurance plan that buys a Pool of Money of $108,000 and that Jane's plan will pay up to $3,000 per month for Facility Care. If Jane is in a Nursing Home that costs $3000 per month then her plan will pay for 36 months of care in a Nursing Home before the Pool of Money dries up. If Jane is getting care at home and her Home Care only costs $1800 per month then her Pool of Money will pay for 60 months of care before drying up. When your Pool of Money runs out of money then your policy ends- you do not pay premium anymore and your plan is over. Some Long Term care Insurance plans have a feature called Restoration of Benefit that "refills" your Pool of Money when you have been off claim for a fixed period of time because your health has improved.

Long Term Care Insurance is one of the most heavily regulated insurance products and has many consumer safeguards built in.

Types of Long Term Care Insurance Policies: We know from another page on this website that people receive Long Term Care in one of two settings: in a Facility (a Nursing Home or Assisted Living Facility) or at Home. There are generally two types of Long Term Care Insurance plans: Facility Only and Comprehensive Plans. A Facility Only Plan just pays for care in a Facility, Nursing Home or Assisted Living Facility, there is no coverage for care at home. This type of plan may be a fit for you if you are looking for a lower priced plan or if staying in your home is not an option. Many people who are renters like this type of plan.

A Comprehensive Plan covers care in a Facility or at Home. You as the consumer make the decision where you will get your care in consultation with your family and doctor.

There are two types of Home Care: Formal Homecare and Informal Homecare:

Formal Homecare is when you get care in your home from someone from an agency while Informal Homecare is when you get care in your home from someone who is not from an agency. Examples of Informal Homecare include getting care from a family member or friend.

Q: Once we have a Long Term Care Insurance policy does the cost for the policy increase every year as we get older likes some types of life insurance or health insurance?

A: No. the cost for an existing Long Term Care Insurance policy does not increase each year. When you buy a policy you lock in the rate.