What Is Long Term Care?

We'll explain what long term care is, why it matters, and highlight key concepts to keep in mind when reviewing coverage options.

Long term care is a range of services designed to assist you in performing everyday tasks that you may no longer be able to complete on your own. These services can help you with basic personal care needs such as eating or bathing. Your care can occur in your home, with a certified nurse, in an assisted living facility, or in a full care nursing home.

In general, long term care services can be quite expensive and are not covered by health insurance plans. You can face the risk of depleting your personal savings when in an extended long term care situation.

If you're concerned about managing the cost of long term care, there are several options that can help you pay for your care.

Medicaid

Medicaid is a government program that offers financial assistance for people with low income and limited resources to help cover health care costs. However, in order to receive Medicaid, you must meet certain requirements. For example, Medicaid applicants must have depleted most of their savings prior to receiving coverage. For those who qualify, Medicaid will typically cover 100% of long term care costs.

Long term care insurance

Long term care policies can offer assistance to help offset the cost of long term care. These policies can help protect your personal savings and your estate from being depleted by extended long term care costs.

There are two main options for long term care insurance: Traditional long term care insurance and hybrid insurance.

Traditional long term care insurance

With traditional long term care insurance, you have the flexibility to customize your policy to fit your need. For example, you choose the exact amount of coverage you want. You also specify when you want your benefits to start and how long you'd like them to last. This makes traditional long term care insurance generally one of the most efficient ways to get the most coverage for your premium paid.

Typically, you pay an annual premium for life, although your premium payment period could be shorter. Also, premiums are not guaranteed to stay the same and may rise after purchase.

If you cancel your policy or end up not using long term care services, typically you will not receive refunds of your premium or any cash value.

Hybrid insurance

Hybrid insurance combines long term care insurance with either life insurance or annuities. In the event that you do not use long term care services, your beneficiaries will receive a death benefit or payment.

Furthermore, hybrid insurance policies often offer a surrender value—which is a cash payment that is paid to you if you choose to cancel the policy.

Typically, these policies are single payment premiums or flexible payment premiums for a certain number of years.