Types of LTC Coverage

Long-term care insurance comes in several forms, each designed to meet different needs and preferences. Understanding these options helps match clients with appropriate coverage.

Traditional LTC Insurance

Traditional (standalone) LTC insurance is a pure insurance product that provides benefits only for long-term care expenses.

Characteristics of Traditional LTC

Advantages

• Specifically designed for LTC coverage
• Highest benefit amounts available
• Tax benefits for qualified policies

Disadvantages

• Premiums may increase over time
• No return of premium if never used
• "Use it or lose it" concern

Coverage by Setting

Facility-Only Coverage

• Covers care in nursing homes and assisted living facilities
• Does NOT cover home care
• Lower premiums than comprehensive coverage
• Becoming less common as home care preference grows

Home Care Coverage

• Covers services provided in the insured's home
• May include home health aides, adult day care
• Does NOT cover facility care
• Relatively rare as standalone product

Comprehensive Coverage

• Covers BOTH home care AND facility care
• Most flexible and popular option
• Allows care in setting of choice
• Higher premiums than single-setting policies

Exam Tip: Comprehensive coverage is the most common type sold today because it provides flexibility in choosing where to receive care.

Hybrid/Combination Products

Hybrid LTC products combine long-term care coverage with life insurance or annuities, addressing the "use it or lose it" concern of traditional LTC policies.

Life Insurance with LTC Rider (Linked-Benefit)

How It Works:

1. Purchase life insurance policy (often with single premium)
2. If LTC is needed, policy accelerates death benefit to pay for care
3. If LTC is never needed, beneficiaries receive death benefit
4. Some policies include "extension of benefits" beyond death benefit

Annuity with LTC Rider

How It Works:

1. Fund an annuity contract
2. If LTC is needed, can withdraw 2-3x normal amount for care
3. If LTC is never needed, use annuity for retirement income
4. Provides tax-free LTC benefit under §7702B

Partnership Programs

Long-Term Care Partnership Programs are state-federal collaborations that encourage LTC insurance purchase by offering special Medicaid asset protection.

How Partnership Programs Work

1. Purchase a state-approved partnership policy
2. If you exhaust policy benefits and need Medicaid:
   • Protect assets equal to benefits received from the LTC policy
   • These protected assets are NOT counted for Medicaid eligibility

Partnership Policy Requirements

• Dollar-for-dollar or total asset protection (varies by state)
• Must include compound or equivalent inflation protection (for under age 61)
• Policy must be certified as partnership-qualified

Example: If your partnership policy pays $300,000 in benefits before exhaustion, you can protect $300,000 in personal assets when applying for Medicaid.

Comparison of LTC Product Types

Employer-Sponsored LTC Insurance

Some employers offer LTC insurance as a voluntary benefit:

Characteristics

• Group rates may be lower than individual
• Simplified underwriting for employees
• Portability varies by plan
• Coverage for spouses/parents often available

Federal Long-Term Care Insurance Program (FLTCIP)

• Available to federal employees and family members
• Administered by John Hancock
• Offers various benefit options