Those of us with parents or aging family members who have long term care insurance (LTCI) are in a lucky minority. Only about 3% of Americans own an LTCI policy. This is insurance that covers some or all of their long term care costs for a predetermined length of time—generally 2-6 years, though some policies offer lifetime coverage.

Long term care refers to assistance with activities of daily living (ADLs) including bathing, dressing, toileting, personal care, eating, walking, and safety. This is care that’s not covered by health insurance. Each long term care insurance policy stipulates how/where the care must be provided to be eligible for reimbursement: in a nursing home, an assisted living facility, or at home.

The main benefit of LTCI is that we won’t have to rely solely on our loved ones’ savings, then our own, to cover all of their long term care expenses as they age. And those costs can add up fast—more on that in a bit. It may also enable some family members to be paid as the care providers for our loved ones.

Types of Long Term Care Insurance

First, it helps to understand what kind of long term care policy our loved one has. There are three different types that come with different benefits.

Traditional LTCI

This works a lot like health insurance, car insurance, or home insurance. An individual pays the premium every month or year. If they meet eligibility requirements to make a claim for long term care services, they start receiving their monthly benefit amount to reimburse care costs. If they never need long term care—let’s say they die in their sleep of a heart attack before they ever need assistance with ADLs—the money they paid in LTCI premiums is gone. It doesn’t become part of an inheritance.

Hybrid LTCI

A combination of Long Term Care Insurance and Life Insurance, this kind of insurance policy ensures both long term care benefits for the individual who owns it, and a death benefit for their heirs. Many of these policies provide the option of canceling the policy after 10 years and walking away with a portion of the premiums paid. The drawback with that is that money is lost and no benefits are available. These policies also tend to be more expensive than traditional LTCI policies.

Life Insurance with a Long Term Care Rider

A rider is an addendum to a permanent (not term) life insurance policy that adds or improves coverage. If an individual pays extra in premiums to add a Long Term Care rider to their life insurance policy, they can use a portion of the death benefit to help pay for their long term care. And their heirs can still receive the remaining portion of the death benefit upon their passing.

Does Long-Term Care Insurance Pay Family Caregivers?

The short answer is yes, some LTCI policies pay family caregivers. But how do we know if our family member's policy will pay us? For that, we need the long answer.

Okay, so about 3% of us have hit the LTCI jackpot. And by “jackpot,” I mean our loved ones (and we) won’t have to shoulder the entire financial burden of their long term care. Now we have some choices to make. Will that care be provided in a nursing home, an assisted living facility, or at home? Before we make this decision, it’s smart to read through the LTCI policy or call the insurance company or insurance agent to see how much it will pay, and to whom, in each of those scenarios. Keep in mind, the average cost of an assisted living facility (ALF) starts at about $59,000/year for room and board alone. Depending on the level of assistance needed, that yearly total could go up another $20,000 or more.

If the policy covers in-home care, we need to find out if that care has to be provided by a “formal caregiver"—this would be a professional, paid caregiver—or if it can be provided by an “informal caregiver”—this refers to a friend or family member. If the policy pays informal caregivers, we’re in an even luckier minority: family caregivers that LTCI will pay for providing long term care to an aging loved one. Many LTCI policies only pay formal caregivers, and some even require those caregivers to be employed by or contracted with a professional home care agency.

How To Get Paid By Long-Term Care Insurance

Once we determine that our loved one’s LTCI policy pays family caregivers, we need to contact the insurance company to tell them that we will be the policy owner’s care provider. Each company likely has its own procedures for setting up payments.

Because we would be considered informal caregivers, we wouldn’t have to submit receipts for reimbursement. Instead, we’d be paid via cash indemnity. In this payment model, the insurance company pays the policy holder a direct monthly benefit amount that they then use to pay the family caregiver. This has the advantage of allowing the policy holder to receive more money each month than the cost of the care. This income will be tax-free if they have a “tax-qualified policy.” So that’s an important thing to ask the insurance company when we’re setting things up.

Services Covered by Long-term Care Insurance

I talked about a few of the long term care services that LTCI covers. Let’s look at all of them.

Nursing Homes / Assisted Living Facilities

These tend to be the most expensive care settings. Pricing runs on average $59,000-$108,000 per year, depending on the level of our loved one’s impairment and need for assistance. Nursing Homes and memory care units for people living with Alzheimer’s disease or other dementias are at the higher end of that scale. These long term care options give the older adult the advantage of professional care providers and social stimulation. And they free up family members to continue to work, socialize, and raise their own children, while allowing ample visiting opportunities.

Adult Daycare Services

This can be a good solution for those of us whose aging family members live with us, but need supervision and care while we’re at work. They can also provide respite care if we’ve chosen to become a full time family caregiver. The average cost of adult daycare in the U.S. is $70/day.

Help with Activities of Daily Living (ADLs)

Again, this is what formal and informal caregivers provide to older adults. Typically, LTCI policies require that the policy holder be unable to perform at least two ADLs on their own to qualify for the LTCI benefit.

Home Modifications and Equipment

Keeping older adults safe at home can get expensive. Luckily, many LTCI policies will cover the costs associated with home modifications, including:

• Grab bars in the bathroom
• Accessibility ramps
• Stair or bed rails
• Walk-in shower
• Raised toilet
• Power recliner or chair
• Accessible light switches/electric outlets
• Wider doorways
• Stair lift
• Low-pile carpeting or other flooring

You can discuss your family’s specific needs with a home modification specialist before starting the projects to set priorities, timelines, and budgets.

Transportation services

If our loved one’s health prevents them from driving, their policy may cover the costs of transportation services to and from appointments or for running errands. There are ride sharing options that focus specifically on older adults such as SilverRide, Gogograndparent, and Lively Ride from Best Buy Health. Uber and Lyft are also an option for those with smartphones.

Other Ways To Get Paid As a Family Caregiver

I’ve established that few of us are caring for an aging loved one with an LTCI policy that pays family caregivers. But that doesn’t mean that the rest of us are completely out of luck. There are other ways some of us can get paid for the care we provide.

Government Programs‍

‍Medicaid and the U.S. Department of Veterans Affairs (VA) both have programs that pay family caregivers. But eligibility is limited to certain Americans. Medicaid services are only available to people with limited income and resources. Each state runs its own Medicaid program, so eligibility requirements and benefits can vary from state to state. The VA has four programs that pay family caregivers of some veterans or their surviving spouses.

Paid Family Leave‍

‍Eleven states and Washington DC have enacted paid family and medical leave laws (CA, CO, CT, DC, MA, NH, NJ, NY, OR, RI, VT, WA) And four more states have paid leave laws coming online by 2026 (DE, MD, ME, MN). These laws allow eligible residents or workers in the state to continue to receive all or a portion of our income for up to 12 weeks if we have to miss work to care for a family member with a serious health issue. Many employers also offer paid family leave. It’s worth a chat with our Human Resources departments to see what may be available to us.

Other Insurance Options‍

‍If our loved one has been diagnosed with a terminal illness, they may be able access a portion of their life insurance death benefit while they’re still alive. The proceeds can be used to pay a family caregiver.

Another way to access some of the death benefit from a life insurance policy is to sell the policy for a portion of its pay-out value to a third party. This is an investment approach for the buyer, because they, in effect, become the beneficiary. The seller (our loved one) can use the proceeds from the sale to pay a family caregiver.

For more in-depth info on all of these options, check out our article “Four Ways to Get Paid as a Family Caregiver.”

As the cost of care continues to rise, and our aging population continues to grow, the benefits of long term care insurance will become more and more apparent. Fewer families will be able to afford assisted living facilities and there won’t be enough professional caregivers to care for our aging baby boomers. Even older adults who qualify for Medicaid are having a hard time finding available nursing home care. So whether becoming a family caregiver is part of our plan or not, we may find ourselves in that role.

If our parents or older family members are under 75, and they can afford an LTCI policy—even one that will cover some of their care costs as they age—it would help them and us if they make that investment. Even some folks over 75 can get long term care coverage, if they’re in good health.

Meanwhile, this may be a great time for us to start planning for our own long term care needs. The younger and healthier we are when we start a LTCI policy, the lower the premiums will be. For me, the peace of mind I get from knowing that I won’t saddle my kids with the costs of my own elder care is well worth the cost of my premiums.

At RubyWell, we’re paving a path to financial stability for all family caregivers. Our Family Leave Finder provides state-by-sate info on family leave laws. Soon, family caregivers will be able to make the most of a loved one’s health insurance benefits with our Medicare Advantage Benefits Navigator. And ultimately, we're developing compensation solutions so that every family caregiver can be a paid caregiver. If you’d like to be among the first to hear about future products, join our waiting list.

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