Long term care (LTC) insurance are policies that pay for services used by the insureds for prolonged periods of time that regular health plans won’t cover. These policies provide numerous features and benefits that meet the insured party’s needs and their financial capabilities. LTC plans can be bought directly from insurance companies or purchased through employer-sponsored plans as well.

What Do LTC Plans Cover

LTC plans cover a variety of services that the insured person needs to have a productive life. Some of these services include skilled nursing care, adult day care health centers, assisted living facilities, hospice and respite care. Policies also pay for equipment, home renovations, training and transportation expenses. Laundry, food and housekeeping expenses are covered by these plans if they are not part of the services offered by their paid providers.

Types

There are different types of LTC plans from which to choose. Plans can pay out on a reimbursement or indemnity basis. The difference is that reimbursement plans pay for actual expenses, while indemnity plans pay a flat rate no matter what the services cost. LTC plans can also be guaranteed renewable, which means coverage must be renewed by insurers and premiums can go up only if they are increased on all policies with the same class rating.

Features

There are many features that are either built in or can be added to LTC plans. Insureds are able to receive coverage for a couple of years or for the rest of their lives. Policies also have elimination periods that insureds must satisfy before receiving benefits. This period generally last between 30-90 days. There are several riders that can be added to policies to increase their value to customers, such as waiver of premium, which allows insureds to stop paying premiums once they become disabled, and inflation protection, which allows benefit amounts to increase along with inflation to keep the same buying power. Also, if a policy owners does not like his plan, he can return it within 30 days and receive a full refund of paid premiums.

Considerations

LTC coverage may be considered a qualified or non-qualified plan. Qualified plans are basically paid with before-tax dollars, meaning that the IRS hasn’t taxed the funds used to pay premiums. Typically group LTC plans like those offered by employers are considered qualified plans. Non-qualified LTC plans are purchased privately through insurers with after tax-dollars. The difference between the two determines when policy benefits kicks in. For qualified plans, the insureds must not be able to perform at least two or more Activities of Daily Living (eating, using the bathroom, showering, dressing, etc.) on their own, while non-qualified plans only require the loss of one activity. Another difference is individuals will receive taxable benefits from tax-qualified plans and those who are covered under non-qualified policies will receive payments tax-free.

Warning

There are several exclusions pertaining to LTC policies. Individuals are ineligible to receive LTC insurance coverage based on their medical conditions. Those who suffer from HIV/AIDS, Parkinson’s, Alzheimer’s and cancer cannot be insured under LTC plans. Applicants who are injured from acts of war, drug or alcohol abuse, suicide attempts or whose injuries are self-inflicted may be denied coverage. Also, services provided by family members or in government facilities or injuries suffered from medical treatments performed out of state are not covered by LTC plans as well.

Facts About Long-Term Care Insurance

According to U.S. Health and Human Services Department, the average premium amount of individual LTC policies was $2,207 in 2007. The long term care cost for the insured in 2008 was $75,000, according to the National Advisory Center for Long Term Care Insurance. By 2030, that number will be $300,000 and the number of individuals needing LTC services will be over 23 million. Those who purchase LTC plans pay their premiums at different time lengths such as 10, 15 and 20 years and payments generally cease once the insureds reach 65.