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All About Long-Term Care Insurance

By Seth Mattingly, Esq.

        Long-term care insurance refers to insurance coverage that specifically funds the risk of long-term care. Generally, long-term care policies become effective when the insured person can no longer complete “activities of daily living.” Long-term care policies typically provide robust coverage including: home care, assisted living, nursing home care, general nursing care, and hospice care. Sounds pretty good, right? 


      Well, because they are so powerful, long-term care policies tend to be extremely pricey. Policies may be most appropriate for younger clients (think fifty years old, especially if family history indicates long-term care may be necessary) with high wage potential and significant assets. Most polices run “short and fat” – this means the term of the policy is shorter and the monthly benefit is higher. “Long and lean” policies have shorter terms and smaller monthly benefits. Long and lean policies should be avoided because they may need to be supplemented with other funds.


      When determining if long-term care insurance may be a good option, it is important to understand long-term care policy premiums are calculated. Insurance companies use a number of actuarial factors. Companies always factor in age – older age means higher premiums. Companies also consider relationship status and sometimes offer discounts to couples. Gender can also play a role. Typically, policies are more expensive for women because women are responsible for filing 2/3 of insurance claims. Health is another critical factor. If a potential client is already in poor health, premiums will likely be too expensive.

       Long-term care insurance will likely sound like a good idea to most people as a method of ensuring peace of mind. However, the obvious benefits will need to be weighed against the often expensive costs of retaining the policy. Regardless, reaching out to insurance companies for a quote is a great place to start.

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