Does Long-Term Care Insurance Cover Assisted Living?

Long-term care insurance can be a good idea as it provides for expensive care later in life and can help protect estates from long-term care costs. AARP reports¹ that those older than 65 have about a 50-50 chance of needing long-term care at some point during the rest of their lives. Health insurance does not cover these costs.

However, not all seniors need the nursing home care that long-term care insurance covers. The good news is that most long-term care insurance policies also pay for assisted living.

A step between independent living and nursing home care, assisted living facilities provide care to seniors who need a little help with daily living but not the 24-hour-a-day skilled nursing care of a nursing home.

The annual average cost for assisted living is $4,300 a month. That doesn’t include medical care or prescriptions. The costs of assisted living make long-term care insurance an excellent value. These policies can help seniors get the help they need as they age by offsetting the cost of care.

Related: Paying for Assisted Living

Table Of Contents

What is Long Term Care Insurance?

Long Term Care Insurance, also known as LTC, provides coverage that helps those 65 or older with a disabling or chronic condition offset the cost of their senior care. It enables these individuals to have care through assisted living, in-home care, nursing-home care, home-health care, or adult daycare. Different LTC policies have different coverage details – there are often stipulations around the maximum amount of benefits.

How Does Long Term Care Insurance Work

Long-term care insurance is often part of a long-term financial plan. Many people seek out plans between the ages of 50 and early 60’s due to the cost being lower than if applying at a later age. Additionally, the likelihood of being rejected is higher for older seniors which can influence people to apply earlier.

To apply for long-term care insurance, shop for different policies and choose based on which ones align best with the anticipated long-term care needs and premium costs. The application process involves straightforward paperwork and often requires providing some medical records or health information.

Once approved for coverage, you begin paying premiums. You become eligible for the benefits of long term care insurance when you suffer from dementia or another form of cognitive impairment or you can no longer perform two of the six daily activities:

Bathing alone
Caring for incontinence
Dressing alone
Eating or preparing meals on your own
Getting to, on, or off the toilet
Getting in or out of bed, a chair, or any other seated or lying position

In the event of the above circumstances, your insurance company may send a nurse or representative to review your situation and any medical records. After approval, your policy will typically cover a daily limit of care until you’ve reached your lifetime maximum.

It’s important to note that some insurance companies may require that you pay out of pocket for 30, 60, or 90 days before they will reimburse you for care. This is referred to as the “elimination period.”

Types of Long Term Care Insurance

Generally, long-term care insurance falls into one of two categories: traditional long-term care insurance and hybrid life and long-term care insurance, which is a blend of the two types of policies. Here are how these types of long-term care insurance work.

Traditional Long Term Care Insurance

A traditional long-term care insurance policy will cover long-term care needs, including assisted living, nursing home care, or home care, paying out as much as $3,000 to $5,000 a month over a set period, usually about three to five years.

Hybrid Life and Long Term Care Insurance

Multiple insurance carriers have developed long-term care policies that include a life insurance benefit and have a cash value that will grow over time. These policies are generally more expensive than traditional long-term care insurance.

Does Long Term Care Insurance Cover Assisted Living Facilities?

Yes, long-term care insurance policies are intended to cover care in assisted living facilities if the insured has difficulty with typically at least two daily tasks or activities of daily living.

Long-term care policies usually cover assisted living and nursing home care. Long-term care may also pay for professional nursing care, occupational therapy, or rehabilitation for home care.

Help with tasks such as housekeeping or personal care may also be covered for those needing help in their own home – depending on the policy specifics. Some policies even cover respite care, adult day care, home health care, and hospice care.

However, don’t assume that every long-term care policy covers assisted living. While you can always double check with your insurance agent or financial advisor about long-term care coverage details, you should always make sure to read the long-term care policy details to confirm.

What Does Long-Term Care Insurance Cover?

Most long-term care insurance policies are comprehensive, meaning that they will cover various senior care and custodial care costs.

Assisted Living

Assisted living, which usually offers meals, cleaning, laundry, and some medical / nursing supervision, is covered by most long-term care policies. Some policies have a cap on benefits, meaning that they will only cover assisted living until the maximum benefit level has been reached.

Nursing Home

Nursing home care, which can cost more than $8,000 a month, is covered by most long-term care policies. These facilities include skilled nursing care 24 hours a day, a higher level of care than assisted living. Nursing homes can also include physical therapy as well as memory care for those with cognitive declines which are typically included with long-term care coverage.

In-Home Care

Many people want to live in their own homes for as long as possible. Long-term care insurance can help by paying for at-home medical expenses like nursing care, occupational therapy, rehabilitation, and even help with cooking, cleaning, and personal care.

Hospice Care

Though some insurance providers may cover short-term hospice stays, most providers do not cover hospice care. However, hospice care is often covered by Medicare for people with a life expectancy of six months or less.

What Does Long-Term Care Insurance Not Cover?

While most long-term care policies cover a variety of care costs, they don’t cover everything. Among costs not covered by long term care insurance are these:

Pre-existing Health Conditions

Many insurance companies will sell long-term care insurance to customers with pre-existing conditions or health issues, but they may not cover claims or medical costs related to those health conditions for six months or more.

Mental Health and Nervous Disorders

Some long-term care insurance policies exclude mental health, anxiety, and nervous disorders, which can be common in seniors needing long-term care.

Care Provided by Family Members

Adult children and other family members often are caregivers for older family members, but their care will not be paid for by long-term care insurance. If grown children care for a parent, they will not receive payment for that care.

Treatment Outside the U.S.

Many Americans retire abroad, but not all LTC insurance will cover care outside the U.S. Policies that do cover care abroad may place coverage limits.

Who Might Not Qualify for Long-Term Care

Not everyone who applies for long-term care insurance will qualify. There is no age qualification, although purchasing long-term care insurance later in life can be prohibitively expensive. Applicants must be in good health, and those who need long-term care already will be denied.

Average Long-Term Care Insurance Costs

Costs of long-term care insurance can vary widely since pricing depends on age and health. A healthy 55-year-old man can pay an annual cost of about $1,700 a year for long-term care insurance (monthly premium of about $142). However, the annual cost of long-term care – more than $96,000 a year for a bed in a nursing home, on average – far outpaces the costs of long-term care insurance.

How to Choose a Long Term Care Insurance Plan

When looking at long-term care insurance plans, keep an eye out for the most comprehensive ones, which would provide coverage of the widest area of costs associated with long-term care.

Low monthly premiums are nice, but you should also read the policy carefully to understand the coverage offered. Plans can vary widely in the daily benefit – how much a long-term care insurance plan will pay out per day. Similarly, many plans limit the amount of coverage by capping the number of years at which they will provide coverage for – typically 3-5 years.

Another policy detail to watch for is a waiting period – some plans will require you to pay for your own care for a certain period of time before your long-term care benefits will kick in.

Unless you want a life benefit and cash value, stay with traditional policies. If you already have life insurance and a retirement fund, you probably don’t need those extras. If you are interested in life insurance benefits combined with long-term care, consider a hybrid policy. You may want to discuss with your financial planner to decide what the best type of long-term care insurance is for you.

The best policies are the ones where the policy pays for a variety of costs, including assisted living communities, skilled nursing facilities, physical / occupational therapy, and home care costs (such as a registered nurse coming to your home) that Medicare or traditional health insurance may not cover.

FAQs

As you consider long-term care insurance, these frequently asked questions may come up.

Can You Use Long-Term Care Insurance Internationally?

Many long-term care insurance policies do not cover the costs of care abroad or limit what is covered, which can concern those planning to retire outside the U.S.

Who Doesn’t Qualify for Long-Term Care Insurance?

You should purchase long-term care insurance before it’s needed. If you wait until you have a serious medical condition or cognitive struggles, you may no longer be eligible for long-term care insurance. You or your family will face the cost of long-term care services. Often this means spending life savings until you qualify for Medicaid.

How are Long Term Care Rates Determined?

Just as younger and healthier people pay less for life insurance, they will also pay less for long-term care insurance since they are less at risk for needing long-term care. Costs of long-term care insurance rise with age and infirmity.

Resources

1 AARP: https://www.aarp.org/caregiving/financial-legal/info-2018/long-term-care-insurance-fd.html
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