Introduction to How Long-Term Care Insurance Works

To a large extent, long-term care (LTC) insurance is similar to the disability income protection many people have during their working years. The coverage can be through an employer plan or an individual insurance contract.

As with disability insurance, a claim is made after something happens to qualify the policyholder for benefits. There is a maximum daily, weekly, or monthly benefit (e.g., $150 per day) as agreed in the insurance contract, an elimination or waiting period (e.g., 90 days) after the qualifying event before benefits begin, and a specified duration for the benefit payments (e.g., three years).

Preparing for the possibility of requiring long-term care—with or without insurance—is more complex than planning for most other risks in life. The National Association of Insurance Commissioners has written an informative booklet called A Shopper’s Guide to Long-Term Care Insurance, which can be found here. It is a very simple and helpful overview, widely available from insurance agents or your state insurance department for the asking.