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Types of LTC Insurance

From traditional long-term care policies to new hybrid life insurance policies, learn the pros and cons of each.

What Types of Policies are Available for LTC?

You can purchase Long Term Care (LTC) policies from various places such as an individual, joint or through your employer.

If you are electing to pay for a LTC policy through your employer, it is important to ask whether that policy is portable or not. Meaning, if you leave or are terminated from your employer, can you keep the policy inforce.

A helpful resource to review is ‘A Shopper’s Guide to Long-Term Care Insurance‘, produced by the Texas Department of Insurance.

Traditional Long Term Care Policy

Traditional long-term care insurance can be purchased as an individual or through your employer. These types of policies are much like your auto insurance. For the reason that, if you stop paying premiums you lose coverage. However, unlike auto insurance, where insurance companies penalize bad drivers or even drop coverage for individuals who have had accidents. LTC insurance companies only raise rates for specific demographics of people, rather than on an individual basis. You also can not lose coverage for having a claim.

Purchasing LTC from your employer can be advantageous because an insurance company selling 50 policies will discount the price, making premiums more affordable. Also, employers may also contribute toward these. The downside is that you may not be free to determine the benefits, elimination periods, or terms of the policy.

    Life Insurance With a Long Term Care Rider

    A newer form of long-term care insurance is a combination between a whole life policy and a long term care coverage. These hybrid policies serve two needs.

    The first need being, that it serves as life insurance, which offers a specific amount as a death benefit. The second role being that, should you require long-term care services, the death benefit can be used toward those services as well.

    Asset-based plans are generally funded in a single payment, 10 equal payments, or continuous/on-going payments. They provide the following benefits:

    • Guaranteed PremiumsRates will never increase
    • Death BenefitPayable tax-free to your beneficiary
    • Surrender ProvisionCancel your policy for a return of premium

    In recent years the cost of traditional LTC insurance has skyrocketed, causing policyholders to either force to lessen their benefits or drop their policy altogether. Because of the level-premiums offered on these hybrid policies, you don’t have to worry about premium increases putting your care in jeopardy. 

    Tip

    It is common for siblings to go-in together to purchase a long-term care policy for their parents. Parents do not want to be a burden on their kids.

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