Key Takeaways

  • Long-term care (LTC) insurance is designed to help cover the costs of long-term care services.

  • Many long-term care policies include coverage for memory care provided in long-term care settings.

  • Buying long-term care insurance is a big decision. Find out what you need to consider before enrolling in a policy.

We all want to be healthy and independent. But one day, we could need extra support. Long-term care involves getting help with health and personal needs—whether it’s for a few months or a few years. This type of care can be provided in different settings, such as skilled nursing facilities and assisted living communities.

People with Alzheimer’s disease or other types of dementia often receive a special kind of long-term care called memory care. Like other types of long-term care, the costs of long-term memory care can add up fast. Medicare, Medicaid, and other programs may help with some of these expenses, but their coverage may be limited. An additional option for funding long-term care is long-term care insurance.  

Understanding long-term care insurance and memory care

What is long-term care insurance?

Long-term care insurance, or LTC insurance, is a type of insurance plan that covers expenses related to long-term care services. These services include not only medical care but also help with bathing, toileting, and other personal care tasks.

Who needs long-term care? Almost everyone, eventually. If you're turning 65 today, there's a 70% chance you'll need some form of long-term care. What’s more, one out of every five people will require this type of care for more than five years.1

There are two key categories of long-term care insurance:

  • Traditional long-term care insurance: This is a separate insurance policy specially designed to cover the expenses of long-term care.
  • Hybrid long-term care insurance: Hybrid long-term care policies combine long-term care insurance with either permanent life insurance or an annuity contract. These policies provide benefits for long-term care and may also offer a death benefit or a return of the premium paid.
     

What is memory care?

Memory care refers to a set of services tailored for people with dementia. These services are provided by trained staff who aim to help patients safely maintain their independence and a good quality of life. Memory-focused care can be provided in nursing homes, assisted living communities, specialized memory care facilities, or even at a person’s home.

Services connected to memory care can include:

  • 24/7 supervision and nursing care
  • Help with eating, bathing, and personal hygiene  
  • Management of medications
  • Social activities
  • Activities that stimulate memory
  • Physical activities
  • Providing meals and snacks
  • Help with mobility
  • Physical, occupational, and speech therapies

Who is eligible for long-term care insurance?

There is no age rule for long-term care insurance; nearly any healthy adult can qualify. In general, you want to buy a long-term care policy when you’re still fairly young and healthy. Since most long-term care claims are filed after the age of 70, buying a policy between ages 50-65 is a smart move. Buy a policy too early, and you could rack up excessive monthly premium costs.

Not everyone is approved for long-term care insurance. Applications may be denied for a number of reasons, including:

  • Certain medical diagnoses (e.g., cancer or Alzheimer’s disease)
  • Use of specific medications (e.g., narcotics)
  • Current use of long-term care services

Before enrolling, you'll likely be required to undergo a health screening. This screening may include a memory test delivered either remotely or in-person, depending on the insurer. The purpose of a memory test is to make sure you don't have a serious cognitive impairment. In addition to memory, this test may focus on areas like learning, decision-making, attention, and reasoning.

It's important to understand that if you are diagnosed with Alzheimer’s disease or another type of dementia before enrolling in a long-term care policy, you may be considered high-risk and therefore denied coverage.

What memory care expenses are covered by long-term care insurance?

A long-term care policy generally covers the following related to memory care:

  • Room and board
  • Skilled nursing care
  • Help with personal care tasks (e.g., grooming, eating, toileting)
  • Supplemental memory-focused services  
  • Therapy (e.g., physical, speech, occupational)

Some policies also cover services like laundry and housekeeping.

If you want the option to receive long-term memory care one day, it’s important to choose a long-term care policy that specifically covers Alzheimer’s disease and other types of dementia. Most long-term care policies sold today are broad in scope, but it’s always smart to check the “fine print.”

What you should know before purchasing long-term care insurance

When does long-term care insurance coverage begin?

Your coverage start date depends on what's written in your policy. To qualify for benefits, you typically need to meet specific requirements known as benefit triggers. These often relate to cognitive impairments or the level of assistance you require for daily functioning.

Even when you’re approved for benefits, most policies include a waiting period before those benefits start. This is known as the elimination period. During this time (usually 30 to 90 days), you'll be responsible for covering the costs of services out of pocket. After this waiting period, the insurer will begin reimbursing you for the services you receive.

Coverage parameters

Most policies cover costs up to a specified daily limit once benefits kick in. Alternatively, some policies pay a fixed daily amount. Additionally, most long-term care policies limit the duration of benefit payments. For instance, while a few policies might cover your long-term care expenses for your entire life, it's more common to provide coverage for a set period (three years, for example). Policies typically establish a maximum lifetime benefit, which is the total amount they will pay out for your care.

Inflation protection

Inflation protection is an optional rider that can be added to a long-term care insurance policy. Its purpose is to help policyholders keep up with the increasing costs of long-term care services over time.

Tax implications

Having long-term care insurance can offer certain tax benefits. If your premiums meet the maximum deductible threshold, you might be able to deduct some or even all of them as medical expenses.

Questions to ask when navigating policy requirements

Buying a long-term care policy is a big decision, and you want to make the right choice. Some questions to ask insurers/agents include:

  • Is there a maximum daily benefit or benefits per period?
  • Does the policy provide an expense allowance or reimburse expenses?
  • Do benefits adjust to reflect inflation?

Long-term care insurance costs

Factors determining long-term care insurance costs

The price of your long-term care insurance policy depends on various factors, such as your age, the amount of coverage, and which services are included. If your health is poor, you might only qualify for a limited amount of coverage or be required to pay a higher premium. Some high-risk factors could disqualify you from enrolling in long-term care insurance entirely.

Approximate premium costs for different populations

A 55-year-old man can expect to pay around $900 annually in 2023 for long-term care insurance providing $165,000 worth of coverage, according to data from the American Association for Long-term Care Insurance (AALCI) . Women typically face higher premiums. On average, a 55-year-old woman will pay approximately $1,500 annually for the same level of coverage in 2023.2

Memory care costs and payment options

How much does memory care cost?

Using Genworth's Cost of Care Survey, you can research the average costs for different long-term care settings where memory care is provided. For example, in Albany, New York, the average annual cost of a semi-private room in a nursing home is currently $161,239. In contrast, the same type of room in Baltimore, Maryland is $129,575.3

Alternative ways to pay for memory care

  • Medicare: Medicare covers some costs for people with dementia, including cognitive assessments, hospital care, home health care, medications, and hospice care. Medicare also covers care planning for qualified patients with Alzheimer's disease and dementia.
  • Medicaid: This program generally pays 100% of the costs of a nursing home stay, including any memory care services provided in the scope of that care. Medicaid does not, however, pay for room and board in specialized memory care facilities. It could cover some memory care services provided in these settings for eligible patients.
  • Veterans’ benefits: Eligible veterans with dementia may be entitled to a range of benefits through the Veterans Administration (VA).
  • Reverse mortgages: Funds from a reverse mortgage can usually be used to pay for long-term memory care. But you should always talk to a certified financial advisor before applying for a reverse mortgage.
  • Private funds: Many older adults pay for long-term memory care using personal savings, income, pensions, and other private funds.

How much long-term care insurance will you need?

The duration of long-term care required is different for everyone. Research shows women need care for longer (an average of 3.7 years), while men need care for 2.2 years on average.

It’s also a good idea to investigate the cost of long-term care in your region and see how it’s expected to grow over time. According to Genworth's Cost of Care Survey, in Chicago, Illinois, the average annual cost of assisted living is currently $83,950. By 2031, this cost is expected to increase to $112,822.

Other factors affecting how much long-term care insurance you’ll need include:

  • Age
  • Personal and family health history
  • Financial situation
  • Availability of family support

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

The following tips can help you make a smart buying decision:

  1. Carefully review each policy, taking a close look at coverage, terms, and exclusions. Remember that every long-term care policy is unique.
  2. Compare different types of policies and evaluate their costs, benefits, and limitations.
  3. Verify insurance carriers are licensed in your state by checking with your state's insurance department. You can also check their financial stability using sources like A.M. Best.
  4. Avoid purchasing more coverage than necessary. If you have sufficient income, savings, or family support, you may not ever have to deal with high long-term care expenses.
  5. Be careful not to purchase too little coverage. If your policy doesn't cover all your long-term care expenses, you'll need to draw from your own savings, income, and assets.
  6. Ensure you can comfortably afford the monthly premium payments. These rates may increase over time.

Frequently asked questions

How do I find out if I’m eligible for long-term care insurance?

Eligibility for long-term care insurance depends on several factors, including your age, current health, and individual insurer terms. To find out if you qualify, talk to a licensed insurance agent or certified financial advisor.

Can my health insurance policy cover memory care?

Health insurance plans typically do not cover the costs of long-term care services, including memory care. These plans mainly focus on medical expenses related to illness or injury.

Can my life insurance policy cover memory care?

Some hybrid life insurance policies include a long-term care benefit or rider.

If you require long-term care, such as memory care, the policy can provide funds to cover those expenses while you’re alive. If you do not use the long-term care benefits, the policy will still pay out a death benefit to your beneficiaries when you pass away.

Bottom line

No one knows what the future holds. But should you ever need long-term memory care, long-term care insurance can offer financial peace of mind. There’s a lot to consider when buying a long-term care policy. Be sure to do your homework before making a decision—and seek the advice of a qualified professional if you need it.

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

3. Genworth. Cost of Care Survey. Found on the internet at https://www.genworth.com/aging-and-you/finances/cost-of-care.html