Term long-term care insurance (LTCi) is a policy that helps cover the high costs of ongoing care for chronic illnesses or disabilities, such as help with bathing or dressing, in homes, assisted living, or nursing homes, which traditional health insurance and Medicare don't pay for. It's purchased by individuals to protect assets and offers various types, including traditional "use-it-or-lose-it" plans, hybrid life insurance combos, and riders, with costs depending on age, health, and coverage amount, and premiums can be expensive but often lower if bought younger.
What it covers
- Personal care: Help with Activities of Daily Living (ADLs) like bathing, dressing, eating, or using the toilet.
- Facility care: Costs in nursing homes, assisted living, or memory care facilities.
- Home care: Services provided in your home, like personal care, respite care, or adult day care.
Types of policies
- Traditional: A "use-it-or-lose-it" plan with annual premiums, but insurers might raise rates later.
- Hybrid (Life Insurance/Annuity): Combines LTC benefits with life insurance or an annuity; if you don't use LTC, the death benefit goes to beneficiaries.
- Riders: An add-on to an existing life insurance policy that lets you access the death benefit for LTC costs.
Key considerations
- Cost: Premiums can be high, but buying younger (50s) often means lower costs.
- Underwriting: Policies require health questions and medical underwriting to qualify.
- Benefit Triggers: Benefits activate when you can't perform a certain number of ADLs or have a severe cognitive impairment.
- Waiting Period: Similar to a deductible, you pay for care for a set time (e.g., 30, 90 days) before the insurer starts paying.
- Financial Protection: Helps preserve savings and income for retirement.
