8 Factors to Consider Before Buying Long-Term Care Insurance


Long-term care insurance can save families from financial ruin when an elderly parent requires long-term care in a facility such as assisted living or a nursing home. However, like other insurance, there are many different policies available, some good and some poor. A policy with poor terms and limited coverage can be a waste of money. If you or your parents are going to buy a long-term insurance policy, make sure it has good provisions regarding premiums, types of coverage, inflation protection, eligibility and exclusions. Additionally, there are plenty of persuasive con artists who sell bogus insurance policies that your parents do not need or policies that sound like they provide great coverage but really don't.

What to look for when buying long-term care insurance:

  1. Daily / Monthly Benefit Amount
    This is the amount your policy will cover. Some policies let you choose from $50 a day to as much as $500 a day. This is an important coverage option, assisted living costs average $40,000 per year, and a private room in a nursing home costs nearly $80,000. Make sure your benefit is in line with the fees that senior care facilities charge; otherwise, your out-of-pocket expenses will be high.
  2. Inflation Protection
    As you take into account the amount of coverage you need, keep in mind that the cost of senior care continues to rise, so make sure the amount of insurance you purchase is enough to cover expected costs down the road. Inflation protection ensures your long-term policy keeps pace with the rising cost of health care. Inflation protection accounts for the difference in the cost of health care when you purchase the long-term care policy and how much health care will cost when you actually need to use the policy.
  3. Type of Coverage
    There are two main types of policies available: "comprehensive" or "facility care only." Comprehensive policies cover a wider range of health care settings and services. For example, a comprehensive policy may cover home health care costs in addition to nursing homes and assisted living, and it may include more services than a facility-only policy.
  4. Elimination Period
    This is the period of time you have to wait before you are eligible to start receiving long-term care benefits. An elimination period is similar to a deductible on a health insurance policy. During the waiting period until the policy kicks in, you are responsible for the costs of long-term care. Your waiting period choices can range from 30 to 365 days, depending on the policy.
  5. Maximum Lifetime Benefit
    The maximum benefit refers to the total amount of coverage that a policy will provide during the policy holder's lifetime. Policies typically offer a choice of lifetime dollar amounts – for example $100,000 or $300,000. The dollar amounts may also correspond to a period of time. Some insurers also sell "Lifetime" or "Unlimited" coverage that has no dollar limit. With an unlimited policy, you receive benefits for as long as you continue to need long-term care.
  6. Pre-Existing Conditions
    If there is a pre-existing conditions clause, the policy may exclude certain medical problems. Common pre-existing conditions that might not be covered include drug or alcohol abuse, HIV-related illness and diabetes. Some policies won't cover these conditions for up to a year, and other policies might permanently exclude coverage. That means no benefits will ever be paid. Carefully read the exclusions of any policy you are considering buying.
  7. Joint Long-Term Care
    Couples might be able to purchase long-term care insurance "share-care." These joint policies pool the total amount of coverage between the two people. If one person dies without having used up all his policy benefits, the survivor gets those unused benefits added to the remaining policy.
  8. Tax Deductible
    The payments for some long-term care policies can be used as a deduction for Federal income taxes. These policies are known as "Tax-Qualified" or "TQ policies."
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It is very unlikely that any company will provide long term care insurance for someone who has Alzheimer's or is in a nursing home. You need to buy this type of insurance before the need, just like you buy homeowner's insurance before the fire and car insurance before the wreck.

Also, you need to buy it young while it is still affordable. The older you are the more expensive it is. So even if a company will provide the insurance when you are older you may not be able to afford it. One solution to this problem is for the children in a family to help pay for long term care insurance for parents or grandparents. This insurance benefits everyone in a family, the caregivers as well as the person getting care.

If you purchased your policy just a year ago, you will probably NOT be getting any premium increase.
The insurer that recently announced a 40% increase is only requesting that exact increase in one state.
Most of their policyholders who will get a premium increase will get an 18% to 22% increase. And most of those have had their policies for over 5 years.
Most of the people who purchased a policy in the last 5 years will not be getting any increase at all.
Additionally, that insurer has announced that for those policyholders who could get a premium increase, they can elect to modify their benefits (e.g. reduce a 5% compound inflation benefit to a 4% compound inflation benefit) and thereby avoid any premium increase.
Actually, that is not correct. When someone purchases LTC insurance they can choose how long of a "Benefit Period" they want their policy to have. The "Benefit Period" is the amount of days, months, or years, the policy is designed to pay benefits once you qualify for benefits. The size of the Benefit Period is chosen by the person purchasing the policy (not the insurance company).

You can choose a Benefit Period as short as two years, if you want to. Most insurers offer the choice of: 2 years, 3 years, 4 years, 5 years, and 6 years. Many insurers offer 8 years or 10 years. Most insurers allow married couples to "share benefits" so a married couple could share as many as 20 years of benefits between them (if they each had a 10 year Benefit Period).