Long-term care insurance can be a valuable tool to protect yourself and your estate from ongoing care costs. Learn what it is and how it works.
Samantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California Life, Accident, and Health Insurance Licensed Agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans.
Long-term care (LTC) insurance is a type of insurance that covers long-term care needs that typically arise from chronic conditions, and it can help you afford the costs of ongoing care should you need it.
Long-term care insurance is a type of insurance that is, not surprisingly, designed to cover long-term care needs, services, and support. In other words, it pays for needs for a-sistance arising from a chronic illness. It is private insurance, meaning that you purchase it for yourself, much like individual life or health insurance. However, there are some varieties of long-term care insurance that are designed and sold as group policies.
Long-term care insurance pays benefits toward the cost of “custodial care” rather than acute care and surgery, for example. If you can’t perform “activities of daily living (ADLs),” it helps pay for the care you require. ADLs are basic living activities you once could do on your own, but because of a long-term illness or injury, such as arthritis, a broken hip, or just advancing age, you can no longer do without help. ADLs are usually identified as:
Depending on state law and the policy terms, you only must be unable to perform a maximum of three ADLs to obtain benefits from the policy. Some insurers require fewer. Therefore, one factor you should consider in shopping for a long-term-care policy is the number of ADLs a plan requires to trigger benefits.
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