Long-term care insurance is an insurance product sold in the United States, United Kingdom, and Canada that helps cover the costs of long-term care. This type of insurance covers care that is not covered by Medicare, Medicaid, or Medicaid. In general, people who need long-term care are not sick in the traditional sense, but are unable to perform two of the six activities of daily living—dressing, bathing, eating, toileting, controlling urination, transferring, and walking. Age is not a determining factor in the need for long-term care. About 70 percent of people over the age of 65 will need at least one type of long-term care service during their lifetime. Currently, about 40 percent of those receiving long-term care are between the ages of 18 and 64. Long-term care insurance may not be available once there is a change in health. Early-onset Alzheimer’s and Parkinson’s disease—before age 65—are rare. Long-term care is an issue because people are living longer. As people age, they often need help with activities of daily living or require supervision due to severe cognitive impairment. This affects women more than men because they often live longer than men and automatically become caregivers for others. Long-term care insurance can cover home care, assisted living, adult day care, respite care, hospice care, nursing homes, Alzheimer’s facilities, and home modifications to accommodate disabilities. If home care coverage is purchased, long-term care insurance can pay for home care, often from the first day it is needed. It will pay a caregiver, whether a visitor or resident, a companion, a housekeeper, a caregiver, or a private nursing home up to seven days a week, 24 hours a day, up to the maximum insurance benefit. Many experts suggest shopping between ages 45 and 55 as part of a comprehensive retirement plan, to protect assets from the high costs and burdens of extended health care. Other Benefits of Long-Term Care Insurance: In the United States, Medicaid provides long-term care services to the poor or those who are spending their assets and depleting them due to care. In most states, you must spend up to $2,000. If there is a surviving spouse or partner, they can keep an additional amount. Medicare: Medicaid provides for people with limited means who “need nursing care with the possibility of remaining at home and special community care services.” However, Medicaid generally does not cover long-term care provided at home or in assisted living facilities. People who need long-term care often prefer care at home or in a private room in an assisted living facility. Private long-term care insurance is growing in popularity in the United States. However, premiums have risen dramatically in recent years, even for current policyholders. Coverage costs can be prohibitive if consumers wait until retirement to purchase long-term care coverage. As it relates to insurance policies in the United States, there are two types of long-term care insurance policies offered: As it relates to U.S. income taxes, there are two types of long-term care insurance policies offered: Non-tax-qualified policies are sold less frequently. One reason is that consumers want to be eligible for the tax deductions available when purchasing a tax-qualified policy. Tax issues can be more complicated than the deductions alone, and it is advisable to seek good advice on all the pros and cons of a tax-qualified policy versus a non-tax-qualified policy, because the benefits that result from a good non-tax-qualified policy are better. By law, tax-qualified policies impose restrictions on the time that the holder can receive benefits. One survey found that sixty-five percent of purchasers did not know whether the policy they purchased was tax-qualified or not. Once a person purchases a policy, the insurance company cannot change the language, and the policy is usually guaranteed to renew for life. The insurance company cannot cancel it for health reasons, but it can be canceled for nonpayment. Most benefits are paid on a per diem basis, and a few companies offer benefits on a per diem basis at a higher rate. Most policies cover care only in the continental United States. Policies that cover care in select foreign countries typically cover only nursing care, and do so in the event of a classified benefit. Group policies may include provisions for unrestricted or open enrollment periods and a bond guarantee may be required. Group plans may or may not be guaranteed renewable or tax-eligible. Some group plans include language that allows the insurer to replace the policy with a similar policy and change the premiums at that time. The insurer can cancel some group plans. To compensate for the higher insurance risk, group plans may have higher deductibles and lower benefits than individual plans. Some group plans may require the inability to perform three daily activities for nursing care. The Consolidated Omnibus Budget Reconciliation Act gives some former employees, retirees, spouses, former spouses, and dependent children the right to temporarily continue health coverage at group rates. Retirement systems such as CalPERS may offer long-term care insurance similar to a group plan. These organizations are not regulated by state insurance departments. They can raise rates and make changes to policies without state review and approval. Long-term care insurance rates are determined by six main factors: the person's age, daily benefits, the length of the benefit payment, the liquidation period, inflation protection, and health rating. Most companies offer discounts for couples and multiple-lifetime discounts on individual policies. Some companies define "couples" as not just married couples, but also two people who meet the criteria for living together in a committed relationship and sharing basic living expenses. The average age of buyers has declined from 68 in 1990 to 61 in 2005, and the number of buyers under 65 has increased significantly. Most companies offer multiple ways to pay premiums: annually, semiannually, quarterly, and monthly. Companies may add a percentage to the annual payment for more frequent payments. Most plans have options such as continuation of marriage, automatic renewal, reinstatement of benefits, and premium refund. The Disability Reduction Act of 2005 makes partnership plans available to all states. The partnership provides “lifetime asset protection” from Medicaid spending requirements. As of March 2014, 41 states had active partnership programs for long-term care insurance. Most policies pay benefits when the policyholder needs assistance with two or more of the six activities of daily living or has a cognitive impairment. According to the U.S. Department of Health and Human Services, all tax-qualified long-term care insurance plans have the same payer. Most policies have an exclusion period or waiting period similar to the deductible. This is the period of time you pay for care before you receive your benefits. Exclusion days can be 30 to 120 days after a long-term care event, such as a fall or illness. Some policies require intended claimants to provide proof of 30 to 120 days of paid care service before any benefits are paid. In some cases, there may be the option to set zero exclusion days when covered services are provided in the home under the care plan. The policyholder can choose a maximum daily or monthly benefit. This is the maximum that the insurance company will pay for care on a daily or monthly basis. Long-term care insurance supplements that are generally available in Canadian policies include: In Germany there are two different types of long-term care insurance: compulsory long-term care insurance and voluntary private insurance. German law requires people to have basic long-term care insurance. It is one of five compulsory insurances, the others being health insurance, accident insurance, unemployment insurance and pension insurance. As is customary in the German statutory insurance system, the costs are divided equally between employers and employees. There are three types of private long-term care insurance: About 7 million people have some form of long-term care insurance. The vast majority have what is known as conventional, or long-term care health insurance. The opposite is true for new policy sales. About 350,000 new policies are sold each year, 84% of which are benefit or life insurance policies that include long-term care benefits. In the United States, long-term care insurers paid a record $11 billion in 2019 to about 310,000 policyholders.