But, without private insurance or public program coverage, the high cost of long-term care is unaffordable for most Americans. As an alternative to public program coverage and direct payments for services, a market for private long-term care insurance has developed, and grown, in recent years. This fact sheet briefly describes the characteristics and costs of private long-term care insurance policies and the tax consequences resulting from recent legislative and regulatory changes.
Most policies sold today include coverage of services received in nursing homes and at home.
To receive benefits, however, the insured must meet the policy's disability criteria. While health and life insurance policy premiums generally increase with age, most long-term care insurance policies offer the purchaser a premium that will not increase as a result of individual circumstances, such as age or health condition. Yet any premium increase can make the cost of coverage unaffordable for some consumers. Inflation protection is an important policy feature because the cost of long-term care has risen rapidly in recent years. An individual who purchases long-term care insurance in his or her 60s may not need benefits for 20 or more years.