What is Long-Term Care Insurance?
Long-term care (LTC) insurance is coverage designed to pay for ongoing medical and home services if you become unable to handle essential tasks on your own. You can buy LTC insurance as a standalone policy or, in many cases, add it as a rider to your life insurance policy.
What qualifies as long-term care
While there are other types of insurance that step in when you get diagnosed with a specific illness (e.g., an accelerated death benefit rider on your life insurance policy), LTC is a bit broader. While certain medical conditions can activate this insurance, it’s not the condition itself that qualifies you for coverage, but what it does to your ability to handle things at home.
Generally, LTC insurance is triggered by the insured individual’s inability to handle a specific number (usually, two) of what insurance professionals call the activities of daily livings (ADLs). ADLs are the essential to-dos you need to function independently and maintain your quality of life, like:
- Bathing and/or showering
- Getting dressed
- Maintaining continence
- Getting up from a seat or bed without assistance
- Cleaning yourself after using the bathroom
If you have LTC insurance and you find yourself unable to handle some of these ADLs, your insurance provider usually begins a waiting period, which they might also call an elimination period. This usually lasts about one to three months and ensures that you need long-term care, not just help for a brief window of time.
After the waiting period ends, your LTC insurance kicks in.
Using your LTC benefit
Different LTC policies function differently, and that’s true whether you bought LTC insurance as a standalone policy or you added it as a rider on your life insurance coverage.
Across the board, most LTC coverage has a maximum it will pay out over the course of your lifetime. How the money gets distributed, though, depends on your policy. Some variables include:
- Payout timeline. Some LTC coverage pays out a set amount of money as a lump sum once your waiting period is over. Other coverage distributes the money to you on a regular basis, e.g., monthly.
- Amount paid. Some coverage entitles you to a set sum of money at a specific time (usually, monthly), while other policies will require you to submit receipts so you can get reimbursed for qualifying long-term care expenses, provided you’re below the maximum payout for that specific time period.
If your LTC insurance pays out a lump sum, you can use that money however you want, including to cover alternative therapies or to pay friends and family in exchange for help around the house. If you’ll need to submit receipts, though, carefully review what, exactly, your insurance provider counts as a qualifying expense. You don’t want to be left paying out-of-pocket for something that you thought would be covered.