If you or your loved one is in need of home care, you might be wondering if you can use long-term care insurance to pay for it. The answer is: yes, most long-term care insurance policies cover home care, but it’s not always 100% clear-cut how the policy can be used.
“Long-term care insurance can absolutely be used for in-home care,” says Faris Flournoy, CEO at Flournoy Health Systems, where he oversees home care companies. “However, families need to be mindful that benefits are tied to specific eligibility requirements and policy restraints.”
Navigating senior home care for yourself or a loved one can be overwhelming and stressful. Here, we’ll break down what you need to know about using long-term care insurance to cover the cost of in-home care.
Key takeaways
- Most long-term care insurance can be used for senior home care, but each plan is different in terms of what is covered and how many hours or days of care will be paid for. It’s important to make sure you meet eligibility requirements and guidelines.
- Before services can be used, you will usually need to meet the criteria for care, provide medical documentation and will likely need to be assessed by a nurse from the long-term insurance company.
- If you or your loved one needs more care than long-term care insurance covers, you will need to foot the bill yourselves. It’s important to note that Medicare will pay for some medical care and hospitalizations, but it won’t pay for ongoing custodial care like in-home care.
What Is Long-Term Care Insurance?
Before we get into the details about how to use long-term care insurance for home care, let’s go over what long-term care insurance is, exactly.
Long-term care insurance is a type of insurance policy “specifically designed to cover extended support needed for chronic illnesses, disability or cognitive decline,” says Flournoy. “Long-term care insurance can cover services such as personal care assistance, skilled nursing services, assisted living care and nursing home care.”
“Traditional health insurance pays for medical treatment… Long-term care insurance pays for assistance when an individual is unable to safely live independently due to chronic illness, cognitive impairment or frailty.”
— Evan H. Farr, elder law attorney and retirement planner
What’s the difference between health insurance and long-term care insurance?
It’s common to be confused here, but traditional health insurance is not the same as long-term care insurance. In essence, long-term care insurance is fundamentally different from traditional health insurance that you might get through your job, Medicare, Medicaid or through the health care marketplace.
“Traditional health insurance pays for medical treatment — surgeries, hospitalizations, physician visits,” says Evan H. Farr, certified elder law attorney and retirement planner at Farr Law Firm, P.C. “Long-term care insurance pays for assistance when an individual is unable to safely live independently due to chronic illness, cognitive impairment, or frailty.”
As Farr points out, Medicare, the health insurance plan that most seniors use, will pay for medical care and hospitalizations, but it won’t pay for ongoing custodial care, like home care. “Long-term care insurance bridges that gap,” Farr says.
What is home care?
Home care refers to any care that a senior gets in their home. This can include services to help with the daily tasks of living, such as meal preparation, cleaning, getting dressed, using the toilet and getting in and out of bed. This type of home care is typically provided by a home health aide.
At times, you may receive more medicalized care in your home, such as skilled nursing care, physical therapy or occupational therapy. These services are performed by health care professionals and are often covered by insurance.
The benefits of home care are that a senior who needs extra help or supervision at home can remain in a familiar place, close to family, and can potentially preserve more independence. Home care usually means more one-on-one care, as opposed to an assisted living facility or nursing home, where each staff member is overseeing several different residents’ care at once.
How does Long-Term Care Insurance Cover Home Care?
While most long-term care insurance covers home care, a lot depends on your individual policy and how much care you need.
Policy coverage variations
In the past, long-term care insurance didn’t necessarily cover home care. “Older contracts are frequently facility-only contracts,” Farr explains. “In contrast, most policies written over the past 20 years include payment for licensed home care agencies.”
There are variations, too, in terms of what type of in-home caregivers are permitted to work for your family if you use long-term care insurance. “Payments for independent caregivers are occasionally made under long-term care insurance policies; however, most policies will require either agency affiliation or credentialing of the caregiver,” Farr says.
Types of services covered
According to Farr, most policies cover assistance for Activities of Daily Living (ADLs), such as:
- Bathing.
- Dressing.
- Toileting.
- Transferring.
- Continence care.
- Eating.
Long-term care insurance may also cover skilled nursing care, homemaking assistance and respite care. On the other hand, companion care is typically limited, Farr says. But again, this depends on your policy.
Costs covered
Most long-term care insurance policies will pay a daily or monthly fixed amount for each type of care you or your loved one needs, Farr explains. As such, if the actual cost of care exceeds that amount, you or your family will need to make up the difference.
This can add up, depending on the type of care you need, as well as how many hours of care are needed. As Farr notes, in many areas of the country, home care can range from $25 to $35 per hour, and 24-hour care can exceed $20,000 per month. “Long-term care insurance doesn’t make care ‘free’ — it slows down the burn rate,” Farr says.
Pros and cons of using long-term care insurance for home care
In many cases, using long-term care to pay for home care is a lifesaver, but it’s not without its issues.
A noteworthy advantage of using long-term care insurance benefits for in-home care is that it offers flexibility and lets you receive care in a familiar and comfortable place. “Home is where most people would like to remain,” Farr says. “Long-term care insurance provides families with the financial means to make this possible.”
On the other hand, a disadvantage of using long-term care insurance for home care is the daily or monthly benefit cap that most plans have in place. Additionally, most plans have a maximum number of days the policy will pay for benefits, which can be restrictive.
“If the cost of in-home care exceeds what the policy limits — which occurs frequently in areas with higher than average home care costs — the family will need to bear the excess costs themselves,” Farr explains.
“Long-term care insurance is not just a policy; it is a strategy. Families who understand this early are better positioned to avoid coverage gaps and navigate the home care process more seamlessly.”
— Faris Flournoy, CEO and home health care expert
How do you qualify for long-term care benefits?
OK, so once you have a long-term care plan in place, what happens next?
You may face a waiting period
Something that takes many families by surprise is that even if you’re approved by your long-term care company to use your benefits, you won’t necessarily be allowed to begin services right away. “Most policies include a waiting period, known as the elimination period, of 30 to 60 days before benefits begin,” Flournoy explains.
If you expect that you’ll need to use your benefits in the near future, you should ask your company if they have an elimination period and what it is. This way, you can plan accordingly.
You must meet the requirements for benefits
In order to activate your benefits, you must meet the criteria set forth in the policy. “Most policies trigger benefits when the individual purchasing the insurance cannot perform at least two of six Activities of Daily Living without substantial assistance, or when the individual purchasing the insurance has severe cognitive impairment such as Alzheimer’s disease,” Farr explains.
You may need to provide medical documentation
Most policies require you to provide medical documentation that services are needed. This may be in the form of diagnoses from your medical provider or a letter from your provider. In addition, the insurance company will likely conduct their own assessment, says Farr. Usually, you will be evaluated by a nurse from the insurance company, who will determine whether you qualify for benefits.
A written care plan must be followed
After you’re approved for care, a formal plan of care will be expected. “In many cases, the policy will require that the care be provided in accordance with a written care plan developed by a licensed health care professional and updated on a periodic basis,” Farr explains.
Making the most out of your long-term care insurance
Long-term care insurance can be tremendously helpful for seniors who need extra help at home with the daily tasks of living, but Farr cautions seniors and their families not to wait until there’s a crisis to review your policy.
“If your parent is currently receiving assistance with bathing or dressing, then it is probably time to review the policy,” he says. Reviewing the insurance plan carefully will enable you to avoid losing potential benefits and help you plan to cover elimination periods and costs of care not included in your plan.
“Long-term care insurance is not just a policy; it is a strategy,” says Flournoy. “Families who understand this early are better positioned to avoid coverage gaps and navigate the home care process more seamlessly when care is needed.”
