Long Term Care Insurance

Everyone should try to get a long-term care insurance policy. Everyone. It can make the difference in how your later years turn out. In 2010, long-term care insurance companies paid an estimated $6 billion dollars in claims.

The Federal government, most Fortune 500 firms, state governments and major cities offer group long-term care insurance plans to their employees. (Happily, I helped implement many of those plans by doing the employee education component.)

There are two types of traditional long term care insurance policies:

1) Plans that only cover care in a facility (Assisted Living or Nursing Home) that are called Facility Only policies. Please note these plans do not cover care at home.

2) Comprehensive Policies cover care in a facility or care in the insured’s own home or community and these are the most popular type of policy. (The client always chooses the setting for care when they go on claim).

Today, almost all long-term care insurance policies include the services of a “care advocate” who is a nurse or social worker who helps the client make decisions about their care.

The two key long term care insurance concepts are:

1) “Pool of money” or “lifetime maximum benefit”

2) “Daily benefit amount”.

The “pool of money” or “lifetime maximum benefit” is the maximum amount of care your policy will pay for over the life of the contract. This total amount of benefit is even available if you need to make a claim the first day your policy is effective.

The daily benefit amount is the maximum that your policy will pay for care each day.

Almost every adult already has one or more “pools of money” from an insurance company. Examples include:

  • The face value of life insurance
  • The policy limits on car and homeowners insurance.

A long-term care insurance policy pays for care until you use up the entire amount of the “pool of money” or lifetime maximum benefit you bought with the plan. If you spend less than the maximum daily benefit amount, then your plan will pay longer for your care.

There is much confusion about what a long-term care insurance policy costs and what constitutes the “right policy” for someone. The cost for a long-term care insurance policy is very simple – you buy a policy that fits your monthly budget. If you want a policy and you can afford $120 per month then you should get a $120 policy. Of course, the more you spend for your policy the more benefit you get.

The “right policy” for someone is easy to figure out. The “right policy” is the policy someone already has in place when something happens to him or her.


A 45-year-old woman is paralyzed in a car accident. She has a long term care insurance policy with a “pool of money” or lifetime maximum benefit of $185,000. This policy is the right policy for her because she had the policy in effect when she was injured.

Think of it this way: a person with three small kids dies unexpectedly with only $100,000 in life insurance. Would the surviving spouse refuse the check for $100,000 saying, “This amount is not enough?” No, the surviving spouse would be very grateful for the $100,000. Of course, more life insurance benefit would be better care for their kids, but no one would refuse what help already exists.

If you were drowning in a flood, would you turn down the help of rescuers in a rowboat because you prefer to be rescued by a huge Coast Guard vessel? No, you would be very happy the rowboat was there to save you.

Are these examples absurd? No, because this is the same thinking people display when they do not get any long-term care insurance policy because they cannot afford a huge policy.

Remember, most women ultimately need long-term care. Without long-term care insurance they risk using up all their own money and going broke.

In past years, some respected financial and consumer resources have given the terrible advice that people should wait to apply for long-term care insurance until they get a serious condition or turn 65. This is equivalent to suggesting that people wait until their home catches on fire before they try to get homeowner insurance or suggesting people wait until they get terminally ill before trying to get life insurance. One couple I met relied upon flawed advice and put off getting long-term care insurance until they turned 65. Unfortunately, the husband had a stroke before turning 65 and his application was denied.

There are exciting new products coming out from insurance companies that provide additional ways to address long term care costs. New life insurance policies are available that include a long-term care benefit. You can definitely get your money’s worth with one of these new “hybrid” policies.

To find Long Term Care insurance click here.

Does Health Insurance cover long-term care?

Health insurance does not cover long-term care.

Health insurance pays to cure us (skilled care) with care provided by someone with a license: physicians, nurses, physical therapists, respiratory therapists, x-ray technicians and pharmacists.

Since most long term care is unskilled care or custodial care, health insurance does not cover it. The “exclusions” section in your health insurance policy contains the actual wording showing the policy does not cover long-term care. Here are examples of actual wording from health insurance policies excluding long-term care:

  • “Exclusions: Custodial care”
  • “Medical care not covered: Custodial Care or Rest Cures.”
  • “Exclusions: Custodial care, except for covered hospice care.”


1) Susan, a 45-year-old law firm administrator, goes skiing and hits a tree breaking both legs and her right arm. Her health insurance pays for:

  • Ambulance from ski resort to hospital
  • MRI
  • Hospital bed for four days
  • Surgeon and Anesthesiologist
  • Titanium plates and screws that are inserted into broken limbs
  • Body cast
  • Ambulance from hospital to Betty’s home

So far, so good! Her health insurance covers $320,000 worth of bills.

She is sent home from the hospital in body cast. An hour after getting home, she has to use the bathroom – a real problem when you are in a body cast and are home alone. Using her one good arm, she calls her health insurance carrier and asks them to send someone into her home and help her. She learns that help at home with the Activities of Daily Living is not covered by health insurance because it is unskilled care or custodial care. Susan ends up paying out of her own pocket for someone to come to her house each day and help her for the six months she is in the body cast.