Long Term Care Insurance (LTCi) is an insurance policy that helps reimburse long term care expenses. Long term care insurance generally covers long term care not covered by health insurance.
Paying for Care
How to Pay for Care?
Mention long term care and most people envision the recipient as an older person in their later years. However, the need for long term care can arise when you least expect it, as the result of an accident or sudden onset illness or disease. In fact, 37% of long term care recipients are under 65 years old1. Regardless of the cause, when you or someone you care about requires long term care, it’s important to know the options when it comes to funding the care you need, where and how you choose to receive it.
Medicare and Medicaid may be familiar terms but many people don’t know exactly what they fund, for how long, and for whom. The most important thing to know about both is that they have physical and/or financial qualifications to determine if you are eligible for benefits. Those who do qualify to receive benefits are limited in terms of coverage and choice for care facilities. Understand Medicare & Medicaid.
Family & Friends
Insurance & Annuities
There are several types of insurance designed to aid in the reimbursement of long term care expenses. Long term care insurance, life insurance with a chronic illness and long term care riders, and annuities can either pay for aging related expenses or provide a series of regular payments that can used for any reason, including health related charges.
There are several types of insurance that can reimburse policyholders for long term care related expenses.
Long Term Care Insurance (LTCI) can be used to reimburse policyholders for long term care expenses administered in your home or at an assisted living facility or nursing home. LTCI is issued as either an individual policy or you can purchase coverage through some employers that offer group plans.
Some life insurance policies have built in benefits that can help pay for long term care expenses or similar types of expenses. These hybrid models may have a chronic illness rider or long term care rider that is designed to accelerate the life insurance death benefit to cover long term care or chronic illness needs while the policyholder is still alive.
The two most common types of annuities are Immediate Annuities and Deferred Annuities. Within those two categories, annuities can come with many different features. With an Immediate Annuity, the contract owner funds the annuity with a single premium to fund the annuity and in turn, the insurance company promises to make guaranteed payments for a set period of time (for example, 5 or 10 years), for life, or for life with a set period of time (for example, if it was a life and 10 year payment, if the death of the annuitant were to occur in year 5, the annuity would continue to pay out the guaranteed payments for 5 more years to the beneficiary).
There are also Deferred Annuities, where the annuity owner purchases the annuity with a single or multiple purchase payments over time. The annuity is then credited interest at a rate set by the insurance company and the money in the annuity grows tax deferred until the annuity is surrendered, or the annuity owner decides to annuitize it and receive a guaranteed payment similar to that of the Immediate Annuity described above.
There are many different types of Deferred Annuities and how interest is credited to the annuity can vary. Some, called variable annuities, directly participate in the stock and bond markets. How interest is credited is only one way these types of annuities can be different, as different annuities will offer different types of features. One of the features often available is a medical care facility waiver. This type of waiver offers the ability to access your annuity's contract value without surrender charges or other insurance company charges/penalties, that can be used for any reason, but designed to help you pay for the cost of care if you are confined in a medical care facility.
- 2020 U.S. Department of Health and Human Services (https://acl.gov/ltc/basic-needs/how-much-care-will-you-needopens in new window). Site accessed 04/19/21.
- Genworth Beyond Dollars 2018, https://pro.genworth.com/riiproweb/productinfo/pdf/282301.pdf