Long-Term Care Insurance 101: What you NEED to Know
- ashley5822
- Jul 2
- 2 min read
Written by Erin Mills, July 2025
Long-term care insurance is designed to help cover the costs of care when a person can no longer manage daily living on their own due to aging, illness, or cognitive decline. This type of care is not typically covered by Medicare or standard health insurance, which makes it a valuable tool in preserving both independence and retirement assets.
What Does LTC Insurance Typically Cover?
A long-term care policy can help pay for care in a variety of settings, including:
In-home care provided by licensed professionals
Assisted living facilities
Skilled nursing or rehabilitation centers
Adult day care programs
Memory care for dementia or Alzheimer’s
Hospice or end-of-life support services
How do I qualify to use my benefits?
Coverage typically begins when a licensed healthcare professional certifies that the policyholder is unable to perform at least two of the six Activities of Daily Living (ADLs) or has a severe cognitive impairment.
The six ADLs are:
Bathing – The ability to wash oneself in the tub, shower, or by sponge bath
Dressing – Putting on and taking off clothing, including fasteners and prosthetics
Toileting – Getting to and from the toilet and managing personal hygiene
Transferring – Moving in or out of a bed, chair, or wheelchair
Continence – Controlling bladder and bowel function
Eating – Feeding oneself, though not necessarily preparing food
How do I collect my payments?
When your policy is established, you will be purchasing a reimbursement or cash indemnity benefit. These pay out benefits differently:
Reimbursement policies cover actual spent qualified expenses up to your daily or monthly benefit amount. You must submit bills or receipts to receive reimbursement. If you spend less than your maximum, you only receive what was used.
Cash indemnity policies pay the full daily or monthly benefit directly to you, regardless of the amount you actually spend on care. This gives you more flexibility to use the money as needed, including for informal caregivers or non-medical support.
While reimbursement policies tend to have lower premiums, cash indemnity policies offer more freedom in how benefits are used. The right choice depends on your care preferences and financial goals.
How Likely Are You to Need Care?
Statistically, most Americans will need some form of long-term care in their lifetime. According to the U.S. Department of Health and Human Services: Around 70% of people turning 65 today will need long-term care at some point.
Understanding what long-term care insurance covers and how it pays benefits is essential to making the right decision for your future. Whether you are considering a new policy or reviewing an existing one, knowing the differences can help you plan confidently and protect your long-term financial wellbeing. Ask your advisor for a review today!

Long-term care insurance policies contain exclusions and limitations. Eligibility for long-term care insurance, additional policy benefits and qualification for benefits is determined on a case-by-case basis. Guarantees are contingent on the claims-paying ability and financial strength of the issuing insurance company. For costs and complete details of coverage, please contact your financial advisor.