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What is Long Term Care Insurance?

Long term care insurance is a type of insurance policy that covers care in nursing homes, long term care facilities, hospice or even home care. Unlike health insurance that pays for medical expenses, long term care insurance pays living expenses and daily care. It provides a specific amount of money based on the coverage chosen.

What Does Long Term Care Insurance Cover?

While it may seem like long term care insurance would provide everything you need, it does have restrictions and specific things it will or will not cover. Once again, the coverage is based on the type of policy. Generally, long term care insurance pays for the following things:

  • Cost of daily care in a facility
  • Cost of rehabilitation, speech, occupational or physical therapy
  • Specific nursing care if needed
  • Assistance with personal care in your home such as grooming, bathing, dressing or eating
  • Skilled nursing care
  • Housekeeping or assistance with running errands

It's worth noting that long term care insurance primarily pays for living expenses, but does not cover health care. Any health costs should be separately accounted for under a health insurance plan. 

How Much Does It Cost?

Like most insurance policies, the cost of long term care insurance varies from policy to policy. Certain things factor into the cost such as:

  • Type of care needed: cost of an assisted living facility will be higher than a part-time home health aide.
  • When the benefits begin: policies that don’t pay out until at least 90 days will be cheaper one that pays out after 30.
  • Maximum benefits: some policies may be pay for three years while others may be for a longer period.
  • State where you live: costs vary from state to state.

The American Association for Long-Term Care Insurance reports that in 2012, the average annual cost for long term care insurance for a single individual aged 55 was $2,007. This figure was for a plan that paid out $150 per day for a maximum of three years.

Pros and Cons of Long Term Care Insurance

Thinking about long term care insurance can be overwhelming, so we’ve laid out the information in a different way.

The pros to having long term care insurance include:

  • The option for independent living
  • Reduced stress and worry about getting the care they need
  • Reduced financial worry about having to pay for long term care
  • Overall higher quality of life

The only con to long term care insurance?

  • Cost of the premiums

So really, you just have to ask yourself whether you can afford the coverage. If you can't afford it right now, keep it in mind. You may find that your financial situation will change and it's certainly worth having.

Last Updated: April 25, 2016