5 surprising facts to know about long-term care insurance (2024)

When it comes to planning for your retirement finances, the focus tends to be on saving and investing — and for good reason. Without enough money put away, it can be tough to cover all of the expenses that arise after you're done working. And, the type of investing and saving you do can vary depending on your financial goals during retirement, which can put further emphasis on that part of retirement planning.

But building a solid financial foundation for retirement extends well outside of your savings and investments. Other parts of your retirement finances are equally as important to prepare for, too — and that includes the medical expenses you could face in your later years. And while Medicare can help cover some of those costs, it may not cover everything — including the long-term care you may need in the future.

That's where long-term care insurance comes in. This type of coverage is used to pay for the cost of certain types of long-term care, which can put a big strain on your retirement budget if you have to pay them out of pocket. In turn, it can be a vital component of a well-rounded retirement plan — and if you're considering a policy, there are a few other surprising facts about long-term care insurance that you may want to know.

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5 surprising facts to know about long-term care insurance

If you're considering a long-term care insurance policy, there are a few surprising facts to consider, including:

It can cover more than nursing home expenses

One common misconception about long-term care insurance is that it only covers expenses related to nursing homes. However, the coverage from this type of policy extends to various settings, including assisted living facilities, home care, adult daycares and even hospice care. It may also cover the costs associated with aging in place.

This flexibility allows policyholders to receive care in a setting that aligns with their preferences, providing a sense of control over their healthcare decisions.

Understanding the diverse coverage options can help you tailor your long-term care insurance to match your specific needs and preferences. For instance, if you value the comfort of receiving care at home, you can structure your long-term care insurance policy to cover home-based services, allowing for a more personalized and comfortable experience.

Compare long-term care insurance policies to find the right option for you.

Hybrid policies combine life insurance and long-term care coverage

Another surprising fact worth noting about long-term care insurance is the emergence of hybrid policies, which combine life insurance with long-term care coverage. These policies offer a dual benefit, providing a death benefit to beneficiaries if the policyholder passes away without needing long-term care. If long-term care becomes necessary, the policy's cash value can be used to cover those expenses.

The main benefit of hybrid policies is that they address the concern that traditional long-term care insurance can be a "use it or lose it" proposition, as premiums are paid but may not be utilized if the policyholder never requires extended care. This innovative approach provides a more comprehensive solution, adding an extra layer of financial security for both the policyholder and their loved ones.

Health issues can impact eligibility

While it's common knowledge that health plays a role in determining eligibility for long-term care insurance — just as it does with several other types of insurance coverage — many people are surprised to learn the specificsof how health changes can impact their long-term care coverage. In particular, pre-existing conditions, especially those related to cognitive decline, can significantly affect eligibility, and insurers may conduct thorough medical underwriting to assess an applicant's health status before issuing a policy.

However, some policies offer more lenient underwriting standards, making it crucial that you secure coverage before any significant health changes occur. Waiting until health issues arise can limit your options and result in higher premiums or even denial of coverage — which underscores the importance of planning ahead and obtaining long-term care insurance while still in good health.

Some policies offer shared spousal benefits

Long-term care insurance often comes with the option for shared spousal benefits, allowing married couples to maximize their coverage. In a shared benefit arrangement, spouses have access to a pool of benefits that can be used by either partner. This provides a level of flexibility and financial support, ensuring that both people can receive the care they need without being limited by individual benefit amounts.

Shared spousal benefits address the reality that long-term care needs can vary between spouses. By pooling resources, couples can navigate potential healthcare challenges more effectively, offering peace of mind at a time when support and care are paramount.

There may be tax advantages

You may also be surprised to discover that long-term care insurance can offer tax advantages. The premiums paid for long-term care insurance coverage are often tax-deductible, subject to certain limitations. This can be particularly beneficial for business owners seeking ways to manage their tax liability while ensuring comprehensive coverage for potential long-term care needs.

But understanding the tax implications of long-term care insurance can be a valuable component of financial planning, whether or not you're a business owner. And, consulting with a tax professional or financial advisor can help navigate the complexities and leverage potential tax benefits associated with long-term care insurance.

The bottom line

Long-term care insurance is a vital tool when preparing for the uncertainties that come with aging. By understanding these surprising facts, you can make informed decisions about your long-term care coverage, tailoring it to your unique circ*mstances. From flexible coverage options to innovative hybrid policies, long-term care insurance offers a range of solutions that go beyond traditional expectations, providing financial security and peace of mind for the future.