As the name implies, long-term care insurance (LTCI) is an insurance policy that individuals can purchase to pay for some or all of the costs of long-term care. LTCI often covers not only skilled nursing care but also assisted living, personal care, in-home care, respite care, etc. LTCI is relatively new compared to other types of insurance, having been around for 30-35 years, and it has increased in popularity over recent years. Although the annual premium for LTCI can be significant, the policy could pay hundreds of thousands of dollars towards long-term care, so it can be an extremely valuable tool in protecting a family’s assets from depletion by long-term care costs. Recall from Part 1 that the Department of Health and Human Services estimates that at least 70% of people over age 65 will need long-term care services at some point in their lives – and over 40% will need care in a nursing home for some period of time. So, in the end, LTCI can be much less expensive than paying for long-term care out-of-pocket.

The annual premiums and benefits paid under LTCI policies vary widely, depending upon factors such as the following: (1) age and health of the policy holder when the policy is first purchased/issued; (2) types of long-term care to be covered by policy (in-home care, personal care, skilled nursing, etc.); (3) any elimination period (the number of days before the LTCI policy will begin to pay benefits after an individual needs long-term care, such as 60 or 90 days); (4) daily benefit to be paid (such as $100 or $150 or $200 per day); (5) the maximum dollar benefits or years of coverage under the policy; (6) inflation riders (allowing for the purchased daily benefit to increase with inflation until the time benefits would be paid under the policy); (7) waiver of premiums after an individual needs long-term care and benefits begin to be paid under the policy; and (8) the insurance company offering the policy.