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Long-term Care Insurance (LTCI)

What is long-term care insurance?

Long-term care insurance (LTCI) is substantially different from traditional health insurance. Rather than providing assistance for medical expenses, LTCI provides a daily stipend which may be used on healthcare services that assist an individual in living well. LTCI is frequently used to get help with personal hygiene, getting dressed, and preparing and eating food. Different LTCI plans will provide different benefits depending on the specific needs of the individual purchasing the plan.

LTCI costs are variable and depend on certain factors such as how much the policy will pay out per day, how many days in a year the policy will pay out for, and the maximum number of days that the policy will pay out over its lifetime. Other factors that affect LTCI costs are the age of an individual when they purchase the plan, along with additional benefits unrelated to care that an individual chooses to receive, such as an adjustable daily stipend that increases based on inflation rates. 

It’s important to note that LTCI coverage is not guaranteed—if an individual is already in need of many daily services, insurance companies may not extend an offering of a LTCI policy. Like life insurance, it’s generally better to purchase LTCI sooner rather than later, both to lock in attractive rates and ensure that insurance companies are willing to offer a policy at all.

Why is long-term care insurance important in healthcare?

Although the general health insurance market is robust, standard health insurance plans usually do not cover long-term services related to basic daily activities that are necessary to maintain a high quality of life. And, due to the fact that these services are required daily (or at least frequently), costs can quickly spiral out of control. LTCI is an important tool for individuals to ensure that they receive the daily care services they require that fall outside of the scope of a standard health insurance plan.