Long Term Care (LTC) Insurance

I. Introduction

Some people plan for a lifetime to fulfill their retirement dreams.  They work hard to accumulate assets year after year and know exactly how much money may be required to maintain a comfortable lifestyle in later years.  But even with such careful planning, many fail to fully protect those assets once they are in place.

Life insurance can help protect assets when a person dies suddenly, but what will protect those assets if a person needs long-term care services due to a chronic illness or disability?  Advances in medical technology and healthier lifestyles mean greater life expectancy.  Yet many Americans today may have overlooked the possibility that increased longevity may increase the need for long-term care services.

You may believe that you already have protection.  However, health plans rarely cover long-term care services, and Medicare limits benefits for ongoing long-term care services.  Medicaid will pay for long-term care but only for individuals who meet strict asset and income eligibility requirements.

You may think you have sufficient income and assets to self-insure this risk.  But even if you could afford to pay long-term care expenses out of pocket, why would you?  Is that the purpose you had in mind when you worked so hard to accumulate those assets?

Perhaps your children have promised to care for you in later years.  However, when the time comes, they may not have the time, strength, or emotional ability to care for you.  And you may not wish to burden your children with this financial responsibility.

The choices you make now could affect your qualify of life well into the future.  Insuring against the risk of needing long-term care services may preserve your choice in the quality of care and where that care will be provided.  And while the need for help may seem to be years away, you need to make this important decision today while you are in good health and before you suffer from a serious medical condition (i.e., diabetes, stroke, Alzheimers or dementia, cancer, etc.).

II.        Selecting a Long-Term Care Insurance Policy to Meet Your Needs

The better policies include:

  • Care Coordination
  • Informal Caregiver Training
  • Facility Care
  • World-Wide Coverage
  • Waiver of Premium
  • Restoration of Benefits
  • Elimination Period Payback
  • No Pre-Existing Condition Exclusion
  • Alternate Plan of Care
  • Bed Hold Reservation

Most long term care insurance carriers offer coverage that is intended to be tax-qualified to individuals from ages 18 to 85.  Premiums are based on your age at the time of purchase, so the younger you are when you purchase long-term care insurance, the lower your premiums will be for the lifetime of your policy.  Your policy should be guaranteed renewable, so your policy cannot be cancelled as long as premiums are paid on time.  You cannot be singled out for a rate increase.

  1. Home and Community-Based Care, including home health care, adult day care, and homemaker services, to provide you with the professional assistance you need to remain in the comfort of your home or residence.
  2. Nursing Home or Assisted Care Living Facilities to provide you with the skilled nursing, intermediate, or custodial care that you need in a facility appropriate for the level of care that you need and desire.
  3. Elimination Period.  The Elimination Period is the number of days of covered services you may receive before benefits will start.
    • 30 Days
    • 90 Days
    • 180 Days
  4. Maximum Benefit Period.  The Maximum Benefit Period is the length of time that you want benefits payable.
    • Two Years
    • Three Years
    • Four Years
    • Five Years
    • Unlimited
  5. Daily Benefit Amount.  You may choose a daily benefit amount within the range of as little as $100.00 and as high as $500.00 in certain states. 
  6. The daily benefit and benefit period work together to create a pool of dollars from which benefits are paid.  You are eligible for benefits when you need substantial assistance with two or more of the following activities of daily living:  dressing, eating, continence, toileting, getting in and out of bed or chair (transferring), bathing, or you require substantial supervision because of severe cognitive impairment.  Your actual expenses are reimbursed up to the maximum daily amount, until the pool of dollars is empty.

III.       Additional Benefits To Consider In A Long Term Care Policy

  1. Durable Medical Equipment may help keep you at home with supportive medical equipment that meets your unique needs.  This provision is available only in policies that include Home and Community based care.
  2. Bed Hold Reservation will reserve your bed if you must be temporarily absent, for any reason, from the nursing home or assisted care living facility for up to thirty days per calendar year.
  3. Care Coordinator's Services to work with you and your family to help eliminate the guesswork in planning your care.  As an advantage of using the Care Coordinator's Services, Informal Care is available to allow friends or relatives to provide you with personal care at home from someone you know and trust.  Advantages of using the Care Coordinator's Services are not available in the Nursing Home Only Insurance Policy.
  4. Respite Care provides temporary assistance while giving your regular caregivers temporary relief.
  5. World-Wide Coverage will pay for care outside the United States and its territories for a limited time.
  6. Alternate Plan of Care to meet your unique needs with creative arrangements not otherwise covered in your policy.
  7. Elimination Period Payback Provision gives you the option to be reimbursed for expenses you incur during the waiting period, one year after complete recovery from a paid loss.
  8. Three-Year Rate Guarantee ensures that your premium cannot be increased during the first three policy years.  After three years, your premiums can only increase if the premium for an entire class of insureds is increased, or if you change your benefits.
  9. Premium Discounts may reduce your premium, where allowed by your state, for marriage, siblings, and multi-life cases.
  10. Waiver of Premium while you are receiving certain policy benefits.


IV.       Optional Riders Which Offer Inflation Protection, Non-Forfeiture Benefits, and Special Benefits for Couples

  1. Inflation Protection Riders
    1. Simple Annual Inflation Protection:  You may choose to have your daily and lifetime benefit amounts increase each year at a simple rate of 5% or 6%.
    2. Five (5%) Percent Annually Compounded Inflation Protection:
      You may elect to have your daily and lifetime benefit amounts increase by 5% each year on a compound basis.
  2. Non-Forfeiture Riders
    1. Optional Non-Forfeiture Benefit Rider gives you a shortened benefit period if you elected this benefit and your policy lapses after it has been in force for at least three years.
    2. Contingent Non-Forfeiture Benefit Rider is added to your policy if the optional non-forfeiture benefit is not elected and gives you a shortened benefit period if the company has a cumulative substantial rate increase and your policy lapses within 120 days of that increase.
  3. Couples Riders

    1. Couples Additional Benefits to give you and your spouse the following additional benefits when you have identical coverage:
      1. Spousal Premium Waiver - Allows premiums to be waived for both you and your spouse whenever one of you meets the qualifications for waiver of premium.
      2. Spousal Elimination Period - Any day that counts towards your spouse's waiting period will also count toward your waiting period.
      3. Survivorship Benefits - If you or your spouse dies after both of your policies have been in effect for ten years during your lifetimes, then the survivor's policy will become paid up without further premium payment.
    2. Shared Care benefit pool gives you and your spouse the security of an additional lifetime maximum pool of money that can be used by either you or your spouse, if needed, when you and your spouse buy identical policies.

V.        Consumer Price Index Benefit Increase Option Rider (CPI-U)

  1. Eliminate the Guesswork

    With traditional inflation riders, selecting the right benefit is often determined by an educated guess based on your age. A 70 year old may purchase a low simple interest rider assuming the possibility of needing care is just a few years away. Buyers in their 60s might elect a higher simple interest amount. Younger buyers may be better off selecting the compound rider because they plan to hold their policy for a long period of time before collecting benefits. However, since these options only allow for a fixed level of inflation, you could still find yourself with more coverage than necessary in some years, perhaps not enough of an increase in others.
  2. An Affordable Option to Traditional Inflation Riders

    Most long-term care insurance inflation riders require that your policy benefits be increased by a fixed percentage every year. Inflation costs can vary in amount from one year to the next. The Consumer Price Index Benefit Increase Option Rider (CPI-U) helps ensure that your policy benefits keep pace with fluctuations in the cost of goods and services as determined by the Urban Consumer Price Index.
  3. Consumer Price Index Benefit Increase Option Rider

    As with any insurance product, the goal is to have the right amount of coverage in place at the time you need it most. The CPI-U Rider was designed to do just that. Your policy may not help you a great deal years from now if your benefits remain at a fixed level and the cost for care continually increases. The CPI-U increases at the same rate as the cost of LTC services increase. However, the cost of care increase rate may be more or less than CPI-U increase rate and the CPI benefit increase option rider is not intended to be a guarantee for coverage of all costs incurred.

    The CPI-U option rider is designed to work with your long-term care insurance to keep pace with inflation and it usually incorporates the following features:

    1. The price for these benefit increases is based on your issue age - your age at the time that you first purchased the policy.
    2. All policy limits are included in the increase offer. When you accept the increase, all of your benefits will increase by the CPI-U percentage.
    3. You decide whether to accept the yearly increase offers. You can choose to accept or decline these yearly increase offers as many times as you want!
    4. No future underwriting is required for benefit increases. Once your policy is in place you can accept the CPI increase offers at any time, even while on claim for benefits.




The Social Security and Supplemental Security Income (SSI) programs are the nation's income "safety nets" for people whose earnings have either stopped or been reduced through retirement, disability, or the death of a parent or spouse.  The programs are administered by the Social Security Administration, a federal agency.  The Social Security programs are financed through taxes paid by employers and workers.  SSI is financed separately.

  1. Eligibility for the Social Security Program?

    The vast majority of retired people are eligible for Social Security retirement benefits.  In fact, nine out of every 10 Americans who are 65 or older receive Social Security benefits.  But the programs are designed to help people who have not reached retirement age, too.  One out of every three Social Security beneficiaries is not a retiree.

    Credits determine whether you are eligible for these Social Security benefits.  The amount of money needed to earn one credit is adjusted each year for inflation.

    The amount of money you receive is determined by your lifetime earnings, not by the number of credits earned.  In general, the more you pay in Social Security taxes during your working years, the higher your benefits.  Social Security payments will not replace all of your earnings when you retire.  Nor will they fully replace your earnings if you become terminally ill or have a long-term disability.  People who rely solely on their Social Security income usually find it quite difficult to live on the money they receive each month.  And because Social Security benefits - and possibly eligibility requirements - are expected to change in the future, it's a good idea to plan to supplement your Social Security income with pensions, investments, savings, or insurance plans.

  2. Retirement Benefits

    To qualify for Social Security retirement benefits, you or your spouse must be over 62 and have earned sufficient "credits" by working at a job covered by Social Security.  Or, if you are self-employed, you must have accrued credits by paying estimated quarterly income taxes.  To qualify for retirement benefits, most people need 40 credits, which is usually 10 years' worth of work.

    Currently, those born before 1938 are eligible for full retirement benefits at age 65.  Reduced benefits become available at age 62.  The eligibility age for full benefits will increase gradually over the next 20 years to age 67.  The age at which you will be eligible for full retirement benefits is shown below:

    Year of Birth

    Year of 62nd Birthday

    Age for Full Benefits

    1937 or earlier

    1999 or earlier

    65 years



    65 years, 2 months



    65 years, 4 months



    65 years, 6 months



    65 years, 8 months



    65 years, 10 months



    66 years



    66 years, 2 months



    66 years, 4 months



    66 years, 6 months



    66 years, 8 months



    66 years, 10 months

    1960 or later

    2022 or later

    67 years

  3. Early or Delayed Retirement

    If you retire at 62, you will be eligible for Social Security benefits (this minimum age will not change), but you will be paid at a lower rate than you would be if you waited until full retirement age to apply for benefits - and you will be paid at that lower rate throughout your retirement.  The amount is permanently reduced by five-ninths of one percent for each month you receive benefits before your full retirement age.  For example, if you were born in 1938 and begin receiving benefits at age 62 - 38 months before your full retirement age of 65 years, 2 months - you will receive 78.9 percent of your full benefits (5/9 X 1% X 38 months = 21.1% reduction from full rate)

    Because the age for full retirement varies for those born after 1937, the percentage by which benefits are reduced for retirement at age 62 will also vary by your year of birth.  This is simply because the number of months between your 62nd birthday and your full retirement age will be higher or lower depending on the year in which you were born.

    Benefits are increased for each month you delay retirement after your full retirement age.  The amount of increase depends on the year in which you were born.  The increase ranges from 1% per year for people born before 1917 up to 8% per year for those born in 1943 or later.

  4. Benefits for Family Members and Spouses

    When you begin collecting Social Security retirement or disability benefits, other members of your family might also be eligible for payments based on your earnings. Benefits might be paid to:

    • Your spouse, if age 62 or older
    • Your spouse of any age who cares for your child under age 16 or for your child who is disabled and also receiving Social Security
    • Your children, if they are unmarried, and

                                        - under 18, or
                                        - under 19 and full-time elementary or secondary school students, or
                                        - 18 and older and severely disabled (with medical documentation        
                                          established before age 22)

    Your ex-spouse will also be eligible for the same Social Security benefits as your current spouse (50% of your benefits) if he or she had been married to you for at least 10 years, has been divorced from you for at least two years, is at least 62 years old and unmarried, and is not eligible for equal or higher benefits based on his or her own work record or anyone else's.  The two-year waiting period is waived if your ex-spouse had been receiving benefits before the divorce.  Also, an ex-spouse's benefits do not affect your own benefits or those of your current spouse or of anyone else in your family.  Your ex-spouse can begin receiving benefits when you become eligible, even if you are not yet receiving benefits.

  5. Survivors' Benefits

    If you are a widowed spouse of an insured worker you are eligible for benefits if you are 60 or older, or at least 50 years old and disabled.  If you are a widowed spouse and have children at home, you can receive benefits for the children if they qualified under the criteria listed in subsection D. above.  Widows or widowers of people who were eligible for Social Security benefits are also eligible for an additional one-time lump sum of $255, intended to help defray funeral expenses.

    If you are an ex-spouse of an insured worker who dies, you may also be eligible for survivor's benefits if you fit the criteria listed in subsection D. above for a current spouse and are unmarried.

    Dependent parents may also be eligible if they relied on the insured person for at least half their support.

  6. Social Security for Disabled Workers

    You are eligible for Social Security disability benefits if you:

    • have earned enough credits (based on age) and worked recently enough, and
    • have a physical or mental condition that keeps you from performing "substantial" work for at least 12 consecutive months, or
    • have a condition that is expected to result in death

    Payments begin after the sixth full month of eligibility. Social Security's definitions of disability differ from those applied by private insurance companies and even by other government agencies.

  7. Supplemental Security Income (SSI)

    Supplemental Security Income (SSI), the other main program run by the Social Security Administration, provides support to disabled and elderly people who have low incomes.  To be eligible, you must:

    • be a U.S. citizen and
    • have income (including Social Security and food stamps) and assets that are below a certain level and
    • be blind, disabled, or at least 65 years old

    Children as well as young adults may be eligible if they are blind or disabled; however, their family's total income and assets are considered.  Some non-citizens may also be eligible.

    SSI is a separate program from the Social Security programs.  The application process is similar to that for Social Security disability benefits, in that it usually involves proving disability as well as meeting other eligibility criteria.  You can find out more about these benefits by calling or visiting your local Social Security office.  Eligibility for SSI is complicated, and people applying for it must be prepared to document their income and expenses.  SSI payments vary from state to state and from year to year.  In most states, people who receive SSI payments are automatically eligible for medical assistance (Medicaid) to help cover their medical expenses.

  8. Questions

    If you or anyone in your family has questions about eligibility, contact your local Social Security office or get in-depth information on the Social Security Administration's Web site at www.ssa.gov, especially if any of the following conditions exist:

    • You are at least 62 years old and are planning to retire.
    • You are within three months of full retirement age, regardless of whether you are planning to retire.
    • You are severely disabled, and unable to work because of an illness or injury that is expected to prevent you from working for 12 consecutive months or to result in death.
    • Your wife or husband has recently died.