What Are Your Options To Pay For Long Term Care?

The Insurance BarnLast week I was asked for more information about “Long Term Care.”  The request came from another insurance agent who was asking me to link to his website from this one.  I have a feeling that his request was nothing more than spam.

However, his request for more information about “Long Term Care” did emphasize how little people, including many insurance agents, know about Long Term Care


The first thing to remember is that there is a difference between Long Term Care (LTC) and Long Term Care Insurance (LTCI).

The term, “Long Term Care,” has nothing at all to do with money.  It refers to an act that is provided by either a loved one, aide or nurse, to assist an individual whose functionality is compromised.  Either the patient’s mobility is limited and they need help with what two of the six Activities of Daily Living or their minds have lost touch with reality and they are a danger to themselves or someone else if they do not have supervision.


Long Term Care Insurance refers to a specific type of insurance policy that is issued by private insurance companies.  In return for “premium” payments, it guarantees to provide money to pay for the expenses associated with hiring or providing Long Term Care to a patient.

There are 3 types of insurance that is available through private insurance companies.

  1. LONG TERM CARE INSURANCE (LTCI) is a type of policy specifically for the risks of needing Long Term Care in the future.  Of all the different types of insurance that are available it is the most comprehensive.  LTCI can also be the most complicated.  I do not recommend that anyone attempt to purchase LTCI without the help of an insurance agent who is trained in Long Term Care insurance.
  2. HYBRID ANNUITIES – In recent years, private insurance companies have developed annuity plans that will multiply the amount of money that an insured has on deposit by 2 or 3.  They allow policyholders to maximize their own money in the event they need Long Term Care in the future.
  3. LONG TERM CARE RIDERS – These “riders” are attached to permanent Life insurance policies.  Some riders that call themselves, “Long Term Care Riders” are misleading.  They only pay benefits if a doctor verifies that the insured has a chronic illness.  Other “Long Term Care Riders” have the same triggering device as a true Long Term Care insurance policy.  They will pay a benefit if the insured is unable to perform 2 of 6 Activities of Daily Living without help.  The thing to remember is, these policies reduce the death benefit by one dollar for each dollar that is paid for Long Term Care.  Be careful about using these types of plans if your goal is to leave a specified amount of money to your loved ones when you die.


There are other ways to pay for Long Term Care expenses other than insurance.  Here are 4 of them.

  1. MEDICAID –  The biggest payor of Long Term Care bills is Medicaid.  For every dollar the program spends on health care for the poor, it spends three for Long Term Care.  The problem is that most states require you to be able to pass both an asset test and an income test before you qualify for Medicaid assistance.
  2. SPEND DOWN – A “spend down” program is designed for those who have too many assets to allow someone to qualify for Medicaid.  Before they will get any help from the government, they must sell their assets and use the money to pay for their Long Term Care expenses.
  3. VIATICAL PLANS – Viatical plans allow someone who has a life insurance policy to sell the death benefits to a private company, known as a “Viatical.”  The Viatical gives the insured an amount of money that is less than the policy’s death benefit while they are alive to be used as the insured sees fit.  (Normally, the money is used to pay for Long Term Care needs.)  The Viatical company will continue to pay premiums on the life insurance policy.  When the insured finally dies, the Viatical company gets paid the full death benefit.
  4. REVERSE MORTGAGE – A Reverse Mortgage is an arrangement between an individual and a bank that allows the individual to use the equity that he has established on his house for Long Term Care expenses.  On the surface, Reverse Mortgages sound like they are a wonderful concept.  Under the right conditions they are.  Unfortunately, they often have some fine print in them that is unacceptable to children.  Reverse Mortgages require the homeowner to place a lien against the real-estate.  When the homeowner eventually dies, the bank has the first claim on the house.  It must be paid before the children are.  If the homeowner uses too much money on Long Term Care expenses, he could accidentally disinherit his children.  If you are going to use a Reverse Mortgage, have your attorney review the documents before you take any money to make certain that they are acceptable.

2 thoughts on “What Are Your Options To Pay For Long Term Care?

  1. The Federal Deficit Reduction Act provided for every state to have a Partnership program to provide asset protection for those who buy qualified long term care insurance policies. http://www.partnershipforlongtermcare.com/

    An alternative to “lose it or lose it” LTC insurance are linked-benefit products, Life insurance or Fixed annuities with long term care riders. In most states you can also use your qualified money (IRA/401k) to fund your plan. http://guidetolongtermcare.com/linkedbenefit.html

  2. My agent would not let me fill out an application for long term care insurance because if I was denied he would get a ding against him. Can he refuse to let me submit an application.

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