Traditional Long Term Coverage

Plan for Long-Term Care with Traditional Coverage

(Because it's never too early to start thinking ahead)

Traditional Long Term Care Insurance Coverages

In 1946 the first baby boomers were born. Life expectancy was 65 for boys and 70 for girls born that year. Today life expectancy is 80, with lots of folks living well past that age. Retirement plans have to last longer. And one of the big question marks is how to pay for long-term care. A traditional long-term care policy is one way to do it.

Contact an independent insurance agent. Learn how to protect yourself and your retirement plan from the cost of long-term care. 

What Is Traditional Long-Term Care Insurance?

Traditional long-term care (LTC) insurance pays for help with basic activities like eating, bathing, and dressing. Traditional long-term care insurance covers expenses that health insurance, Medicare and Medicaid don’t pay for.

What Does Traditional Long-Term Care Insurance Cover?

Traditional long-term care insurance covers services provided by:

  • Licensed home makers
  • Licensed home health care aides
  • Adult day care centers
  • Assisted living facilities
  • Nursing homes

What It Will Not Cover

  • Care given by family members
  • Medical services covered by health insurance or Medicare

Services covered by traditional long-term care insurance don’t vary state to state.

How Does Traditional Long-Term Care Insurance Work?

Traditional long-term care insurance is usually purchased through an insurance agent or broker. You select the amount of benefit, how long you want it to pay, and when you want it to start. 

The insurance company will ask you for some medical and lifestyle information. If you have certain health conditions, long-term care insurance may be more expensive or unavailable.

The insurance company will pay a benefit if you can’t do 2 of the six activities of daily living by yourself, or are diagnosed with a cognitive disorder.

Key Terms
Daily benefitCash benefit paid per day, usually paid monthly.
Benefit periodHow long benefits are paid, usually two years, five years, or lifetime.
Waiting periodWhen benefits begin after eligibility, usually 30, 60, 90, or 180 days.
Activities of daily livingActivities used to determine eligibility for claims: eating, dressing, bathing, toileting, transferring, continence.
Cognitive disordersDiseases that affect memory, learning, perception, and problem solving such as dementia and Alzheimer's.
Indemnity long-term care policyBenefit is not limited to actual cost of care.
Reimbursement  long-term care policyBenefit is limited to the actual cost of care.
Non-forfeiture optionValue of policy if canceled.
Guaranteed renewableInsurance company cannot cancel the coverage if the premium is paid. They can raise the premium under certain conditions.
Skilled careSkilled care is nursing and therapy care provided by medical professionals.
Custodial careNon-medical care assisting activities of daily living.

The insurance company will pay for care in your home, at adult daycare, an assisted living facility, or nursing home. You will need to provide a doctor’s report and a plan of care. 

Traditional long-term care policies are guaranteed renewable. The insurance company can’t cancel the coverage as long as you pay your premium on time. They can raise the premium under certain conditions. There is no refund of premiums for unused benefits.

Optional Features of Traditional Long-Term Care Insurance

Optional features of traditional long term care insurance include:

  •  Inflation protection benefits: The benefit increases each year by a percentage. Some policies offer a choice of percentages, others don’t.
  • Shared care: If both spouses buy policies, they can share the total benefits. The idea is that If one spouse needs care and the benefits run out, they can use the other spouse’s remaining benefits.
  • Spousal discounts: If both spouses buy policies, the insurance company will offer a discount to both.

 Why Get Traditional over Hybrid?

Traditional long-term care policies are tax-deductible. They qualify for Medicaid partnership plans. Traditional long-term care policies can be a budget-friendly option. Hybrid long-term care insurance benefits are part of a life insurance or annuity policy.

When you buy the life insurance policy, a long-term care benefit is linked to the death benefit. You can pay for the insurance each year or in a lump sum. Whatever you use for long-term care is subtracted from the death benefit.


TraditionalHybrid
BenefitsLong-term care onlyLong-term care, death benefit  for heirs, cash values
Premiums tax-deductibleYesNo
Tax-free benefitsYesYes
Partnership plans availableYesNo
Refund for unused benefits     May be available at an extra costYes
Can premiums increase?YesOn some policies

How Much Does Traditional Long-Term Care Insurance Cost?

Traditional long-term care insurance can be a budget-friendly option. The cost depends on your age, sex, the state you live in, health conditions, and benefits. Here a few examples.

Sample Traditional Long-Term Care Cost - $3,000 per Month, 2-Year Benefit, 90-Day Wait

AgeMaleFemale
50$776$983
55$796$1,053
60$941$1,254

Traditional Long-Term Care and Medicaid Partnership Programs

Medicaid is a federal poverty program administered by each state. Medicaid pays for long-term care if you qualify financially. The rules are a bit different in each state, but here is the big picture. 

To qualify for Medicaid, you cannot have more than $2,000 in assets. Home equity doesn’t count if a dependent lives there. Spouses can also keep as much as $126,000 in some states.

A partnership program works like this. You buy a traditional long-term care policy that qualifies for the partnership program. Don’t worry, the insurance company tells you if it does. When you need long-term care, the policy will pay out the benefits. If the policy benefits run out, you can apply for Medicaid. 

You can keep $2,000 plus an amount equal to the benefits paid out by the long-term care policy.

If you buy traditional long-term care insurance, there is no downside to buying a partnership plan. Hybrid long-term care insurance does not qualify for partnership programs.

Traditional Long-Term Care Policy Premiums Are Tax-Deductible

If your long-term care policy meets the requirements to be tax-qualified, the premiums may be tax-deductible. Your long-term care premiums are considered medical expenses. For 2019, you can deduct medical expenses that are more than 10% of adjusted gross income.

The IRS limits how much of your long-term care policy can be included in medical expenses.

AgeMaximum Deduction
40 or less$420
More than 40 but not more than 50$790
More than 50 but not more than 60$1,580
More than 60 but not more than 70     $4,220
More than 70$5,270

All long-term care benefits are tax-free up to $370 per day or the actual cost of care

Why Go It Alone?

Long-term care insurance is an important part of smart retirement planning. There is a lot to know about the coverage. Independent insurance agents can find you the best coverage at the best price. 

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