Traditional Long-Term Care Insurance

More Information

Traditional Long-Term Care Insurance policies, sometimes called standalone or stand-alone LTC Insurance, are tax-qualified plans that pay for comprehensive long-term care benefits. Unlike hybrid policies, they don’t combine long-term care coverage with life insurance or an annuity. Every premium dollar goes toward protecting you against the cost of care.

Designed for Maximum Long-Term Care Benefits

Traditional Long-Term Care Insurance is designed only to pay for long-term care services, including home care, adult day care, assisted living and nursing home care. You pay premiums for a pool of benefits you can use when you need help with daily activities or have a severe cognitive impairment. While some policies offer return of premium riders, these policies are not life isnurance and this do not have a death benefit.

How does a traditional policy work?

You choose how your coverage is built. Most traditional policies let you customize:

• Benefit amount: The maximum the policy pays per day or per month for care.
• Benefit period or benefit pool: How long benefits last, often expressed as a total pool of money.
• Elimination period: The waiting period before benefits begin, similar to a deductible measured in days.
• Inflation protection: A feature that grows your benefits over time so coverage keeps pace with rising care costs.
• Shared care: An option that lets spouses or partners draw from each other’s benefits.

Traditional policies are tax-qualified under federal law. Benefits begin when a licensed health care practitioner certifies that you need help with at least two of six activities of daily living (ADLs) for at least 90 days, or that you need substantial supervision due to a severe cognitive impairment such as dementia.

Coverage includes custodial care, the hands-on help with bathing, dressing and other daily tasks that health insurance and Medicare don’t cover.

How is traditional coverage different from hybrid coverage?

Traditional policies typically cost less for the same amount of long-term care protection and offer the most flexibility in plan design. The tradeoff: Premiums aren’t guaranteed. Insurers can request rate increases for an entire class of policyholders, and state insurance regulators must approve them. Insurers can’t single you out for an increase based on your age or health. While rate stabilzation rules make it much harder to get premiums increases approved by regulators, it can happen, unlike hybrid policies which cannot have premium increases. 

Traditional policies generally don’t pay a death benefit or return premiums if you never need care, unless you add an optional rider. Hybrid policies offer those features but usually require larger premiums or a lump-sum payment.

Partnership programs and tax advantages

Traditional tax-qualified policies are the type eligible for state Long-Term Care Partnership programs. Forty-five states have Partnership programs, which protect assets from Medicaid spend-down rules dollar for dollar based on the benefits your policy pays out.

Premiums on tax-qualified policies may also be partly deductible as a medical expense based on your age, and benefits are generally received tax-free. Rules vary by state, so check information for your state.