Does Long-Term Care Insurance Cover Independent Living? A Comprehensive Guide

If you’re active, healthy, and living life to the fullest right now, it may be hard to imagine a time when you’ll need extra support. But the reality is that someone turning 65 today has a nearly 70% chance of needing some type of long-term care in their remaining years.¹  Long-term care refers to an array of services designed to meet your day-to-day health and/or personal care needs.

Long-term care services are provided in different settings. One of these is independent living communities. While this type of community is a popular choice for older adults, it can be costly. In this article, we’ll explore what kind of coverage long-term care insurance provides for independent living.

Understanding long-term care insurance and independent living

What is long-term care insurance?

Long-term care (LTC) insurance is an insurance policy intended to pay for the costs of long-term care services. It covers not just medical care, but also personal care services (e.g., help with bathing, dressing, and medications).  

There are two primary types of long-term care insurance:

• Traditional long-term care insurance: This is a standalone policy solely designed to cover long-term care costs.
• Hybrid long-term care insurance: Hybrid policies combine long-term care insurance with either permanent life insurance or an annuity contract.

What is independent living?

Independent living refers to a wide range of all-inclusive housing options. These residential developments may also be called retirement communities, senior living communities, or continuing care retirement communities (CCRCs). In general, they’re designed for healthy older adults who can live safely on their own—but no longer want the burden of home upkeep.

Independent living communities differ in size and structure, often giving residents the choice between private apartments or detached homes with community spaces. Many facilities offer tastefully appointed residences, landscaped grounds, and appealing amenities such as:

• Shared dining areas with optional prepared meals
• On-site recreational and social activities
• On-site banking, beauty salons, and fitness centers
• Transportation
• Light housekeeping
• Laundry facilities
• 24-hour staff and security

Does long-term insurance cover independent living costs?

Long-term care insurance typically does not provide coverage for independent living. However, it can potentially help you reduce the overall costs of living in an independent living community. Should you ever need them, your long-term care policy could help cover the cost of services needed to maintain an independent lifestyle. These services range from personal care to meal preparation, housekeeping, and transportation.

“Keep in mind every long-term care insurer has its own rules and requirements for providing benefits,” says Josh Hodges, NCOA Chief Customer Officer. “That’s why it’s essential to read the fine print. Review the terms of your current or potential policy to find out the ‘who, where, what, and when’ of its coverage.”

Who is eligible for long-term care insurance?

There is no age restriction for long-term care insurance; nearly any healthy adult can qualify. However, a high-risk factor like a serious disability, illness, or impairment could cause an insurer to reject an application.

It’s a good idea to buy long-term care insurance when you’re still relatively young and in good health. Since most long-term care claims are filed after the age of 70, consider buying a policy between ages 50-65. When you purchase a policy too early, you risk paying more in premiums than you need to.

What you should know before purchasing long-term care insurance

When does long-term care insurance coverage begin?

Your coverage start date depends on the terms and conditions of your policy. Typically, before they pay policy benefits, the insurer will require you to meet certain criteria called benefit triggers. To meet the criteria, you usually either must need help with a certain number of daily living tasks or you’ve demonstrated severe cognitive impairment.

Even if your long-term care benefits are approved, you won’t receive them right away. You’ll first need to pay for services out of your own pocket for a certain period of time, which is called the elimination period. The elimination period can last anywhere from 30-90 days. Once it’s over, the insurer begins reimbursing you for services you receive.

Long-term care insurance costs

Factors determining long-term care insurance costs

There are many factors affecting the cost of your long-term care policy, including your age, coverage limits, and services covered. If your health is poor—or you already receive long-term care services—you may pay more in premiums or receive less coverage.

Approximate premium costs for different populations

In 2023, the average cost of long-term care insurance is $900 yearly for a 55-year-old man for $165,000 of coverage. Women pay much more in premiums than men when it comes to long-term care policies. The average premium cost for a 55-year-old woman is $1,500 a year for comparable benefits.²

Independent living costs and payment options
 

How much does independent living cost?

The price tag of independent living can vary greatly depending on many factors, including:

• Geographical location
• Size of living quarters
• Amenities and services provided
• Dining plans
• Additional care

Residents of retirement communities usually either rent their home or buy it outright. They typically also pay a monthly fee that helps cover maintenance and amenities. In a CCRC, residents may be charged a large “entrance fee” in addition to monthly fees.

Brookdale, a senior living operator with communities across the U.S., is one example of the variability of independent living costs, with fees averaging $1,650 to $16,165 monthly.

Other ways to pay for independent living

While long-term care insurance may help pay for some of your long-term care costs, it won’t cover everything. Fortunately, there are other ways to address the costs of long-term care, including:

• Medicare: Since it's not considered medically necessary, original Medicare does not cover independent living costs. Certain Medicare Advantage plans may cover supplemental services such as meal delivery, non-medical transportation, and home environment services.
• Medicaid: Some states offer Medicaid waiver programs that help cover long-term care support services provided in a residential setting. Many of these state programs have long waiting lists.
• Veterans’ benefits: Eligible veterans may be able to receive long-term care benefits through the Veterans Administration (VA). These benefits can help defray the costs of independent living.
• Reverse mortgages: Funds from a reverse mortgage can be used to pay for independent living. However, be sure to talk to a licensed financial counselor before applying for a reverse mortgage.
• Private funds: Many older adults pay for independent living through retirement savings, job income, pensions, and other private funds.

How much long-term care insurance do you need?

The duration of long-term care required is different for everyone. Women tend to need care for longer (an average of 3.7 years), while men need care for an average of 2.2 years. You'll also want to research the cost of long-term care where you live. Genworth's Cost of Care Survey shares the average costs for various long-term care settings.

Other factors impacting how much insurance you’ll need are:

• Age
• Personal and family health history
• Financial situation
• Whether you'll be able to (or want to) count on family for help

How to choose the best long-term care insurance for you

Explore these tips for choosing the right long-term care insurance plan for you or another older adult:

1. Review the coverages, terms, and exclusions of each policy thoroughly. Shop around and get different quotes from carriers.
2. Contact your state's insurance department to make sure a carrier is licensed in your state. Check their financial rating using A.M. Best.
3. Do not buy too little insurance. If your policy falls short on coverage, you'll be required to pay out of your own pocket.
4. Do not purchase more coverage than you need. Consider your personal financial situation and the potential for support from family.
5. Make sure the monthly premium payment fits your budget, keeping in mind that rates tend to increase over time.

Frequently asked questions

Do all independent living facilities take long-term care insurance?
Not necessarily. That’s why it’s important to check with any community you’re interested in. You should also review the terms of your policy to learn about their coverage requirements and restrictions.

Can my health insurance policy cover independent living?
Traditional health insurance plans and Medicare are designed to cover medically necessary expenses. They provide little to no coverage for long-term care costs.

What are the best options for long-term care insurance?
There is no single long-term care insurance policy that’s right for everyone. Before purchasing one, you’ll want to consider your potential future needs, your financial situation, and independent living costs in your region. 

Bottom line

Long-term care insurance is like a safety net for your future—it’s there to help you if you need extended care as you age. However, there are many factors to consider when buying a policy. Take the time to understand your options and talk to a licensed professional if you need extra guidance.

Sources

1. U.S. Administration for Community Living. How Much Care Will You Need? Found on the internet at https://acl.gov/ltc/basic-needs/how-much-care-will-you-need

2. American Association for Long-Term Care Insurance. 2023 Long-Term Care Insurance Price Index Released. March 6, 2023. Found on the internet at https://www.aaltci.org/news/long-term-care-insurance-association-news/2023-long-term-care-insurance-price-index-released