Here are answers to some commonly asked questions about long-term care insurance.

Do long-term care policies only cover nursing home care?

No. In fact the most common use of long-term care insurance benefits is to provide for extra help in your home. It will pay for a visiting or live-in caregiver, companion, housekeeper, therapist or private duty nurse up to seven days a week, 24 hours a day.

Am I throwing money if I purchase a policy and never need long-term care?

Not if you have a hybrid policy, which combines long-term care insurance with either life insurance or an annuity. Essentially, it work like this: if you need the money for long-term care it’s there, but if you don’t, your beneficiaries receive the money at your passing. Learn more here.

Should I wait to own a policy?

Waiting may cost you or prevent you from owning coverage. You pay more the older you are when you buy. A 45-year-old waiting to age 50 to purchase pays about 10% more over their lifetime – despite paying for five fewer years. Waiting also means you could experience a health event resulting in an even higher premium or prevents you from being able to own a policy at any price. If you are healthy and the premiums fit your budget, waiting does not save money.

How much coverage is enough?

It’s a balance – meaningful benefits and meeting your budget. The average policy we sold in 2017 provided about $141,500 in maximum benefits with a $3,800 monthly maximum, growing 3% each year. Based on national costs, this covers 40.7 hours for a weekly home health aide, and 100% of assisted living facility costs. It won’ fully cover the $8,121 a month cost of a skilled nursing facility but this care is less frequent and of shorter duration. $3,800 a month in benefits can help keep your finances from being compromised.

How much does it cost?

The greater your benefits, the greater your premium will be. Policies sold in 2017 cost from $14.22 to $493.02 a month – averaging $163.66.1. 20% were under $100 a month!

Can Long-Term Care Insurance save taxes?

Possibly — at both a state and federal level. Some states provide credits or deductions. Federal tax breaks are limited for individuals and generally greater for  business owners or self-employed. Consult a tax advisor as tax laws can change.

How does long-term care insurance work in plain English?

Your long-term care insurance policy describes coverages under the policy, exclusions and limitations.
Here is our explanation of the basic fundamentals – in plain English!

There are four primary components that determines your benefits and influences your price.

  1. How much? This is the total maximum benefit available under a policy. For instance, $100,000,
    $250,000, $500,000 or more. There are many from which to choose. Benefits are available until you
    have received your maximum benefit.
  2. How fast? This is the monthly limit at which you can access your total maximum benefit. For
    instance, the insurance company does not pay out your “How Much” in a single lump sum. Instead, you
    access your benefits up to a monthly maximum. Depending on the plan your options typically range from
    $1,500 a month to $10,000 a month.
    The How Much and How Fast work together to determine how long your benefits may last. If your
    monthly maximum (How Fast) is $5,000 and your total policy maximum (How Much) is $200,000, and you
    needed the full $5,000 in benefits each month, it would take 40 months (3 years 4 months) to exhaust
    your benefits. If you needed $2,000 a month, say to pay for home care, it could take over 100 months (8
    years and 4 months) to exhaust your benefits.
    The greater your “How Much” and “How Fast”, the higher your premium will be.
  3. Growth Rate? This determines how your benefit grows over time. The most common growth rate is
    3%. With that, if your policy starts with $200,000 in your “how much” and $5,000 in your “how fast”, in
    20 years the benefit limits would grow to over $361,000 and $9,000 respectively.
    Sometimes it makes better financial sense to simply purchase more of the “how much” and “how fast”
    today and forgo a growth rate. Or it may make sense to choose a growth rate other than 3%. A specialist
    can help you identify the growth rate that best suits your goals and budget.
  4. Deductible? This insurance has an Elimination Period which, like a deductible, determines how much
    you may have to pay out of your pocket before benefits are payable. An Elimination Period is stated in
    days, not dollars. The most commonly selected Elimination Period is 90-days. This typically means that
    you must receive 90 days of care which you pay for out of your pocket or that may be covered in part by
    your health insurance before the long term care policy benefits are available.