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Dementia Care in Long-Term Care Insurance Policies

Robert Henry Louis


  • History of Long-Term Care Insurance: Robert reflects on the changing landscape of long-term care insurance, sharing personal experiences.
  • Changes in the LTC Market: The article discusses the shifts in the long-term care insurance market and its impact on coverage.
  • Understanding Policy Provisions: Examining Robert's own policy, the article emphasizes the importance of understanding the specific provisions for dementia care.
Dementia Care in Long-Term Care Insurance Policies

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Long-term care insurance is far less prevalent than life or homeowners’ insurance, and the need for it and how it works is less well-known. It might help this review of dementia coverage to go briefly into the history of long-term care insurance.

For many years, I was the chair of a committee at my law firm that oversaw our various benefit programs, including health and retirement benefits. At one point, we decided to offer long-term care insurance to lawyers and staff, on a voluntary basis and mostly at their own expense, through monthly payroll deductions. I signed up for it, and so did a few others. But most people did not. Why not? For several obvious reasons: it gives no current benefit, unlike health insurance; it might never be needed; and, perhaps most importantly, it is a topic or condition that people don’t want to think about.

Changes in LTC Market

After a few years, the long-term care insurance market changed dramatically. It appeared that insurance companies had underestimated the claims they might receive, in no small part because the cost of long-term care services had risen significantly. As a result, the cost of our long-term care insurance plan more than doubled, and we finally phased it out. Most companies have stopped offering this type of policy, in which you pay monthly for coverage, but lose what you have spent if you stop paying premiums. In this sense, it is more like term life insurance or homeowners’ insurance than whole life insurance.

Long-term care policies continue to be offered, and many of them are now tied to a life insurance policy, so that if the long-term care benefits are not used, a death benefit is payable to beneficiaries. Value builds up in such policies eventually, so that they might be surrendered for a return of a portion of the amount paid in. Additonally, this type of policy is usually priced so that you pay premiums for a set number of years, after which you are “paid up.” There are probably other versions of long-term care insurance, and this is a method of insuring against a particular risk that will surely continue to develop.

The policies of long-term care insurance that are prevalent now generally include basic provisions, plus a series of riders that extend or limit benefits. Unless you practice in the area of insurance regulation and administration, it is likely that the policy will be unfamiliar to you. There are two solutions to this problem, and you should probably adopt both of them: use the services of an insurance broker to explain the policy and answer any questions you might have; and devote some time to a careful analysis of the policy. When I bought such a policy, I followed the first course only, but have now examined the policy more carefully to determine the extent to which the policy covers the care of dementia patients.

Policy Provisions

Insurance policies are easier to understand in recent times and have clearly delineated sections on the benefits provided as well as important definitions of the terms described in the benefits sections. I am going to use my own policy as an example of provisions relating to dementia care.

Other policies, especially older ones, might contain different provisions. This leads to an obvious but very important point: you get the benefits provided for in the policy, and nothing else. Do not assume that the provisions of your policy will be the same as mine. If you decide to buy a policy, ask many questions, so that you fully understand what you are buying.

The eligibility for the payment of benefits in my long-term care policy is based on the following:

  • That previous payments have not exhausted the benefit limits
  • That a licensed health care practitioner (as separately defined) certifies that the insured is chronically ill. Specifically, the insured is chronically ill if either of these conditions exist:
    • The insured is unable to perform (a) without substantial assistance (b) atleast two activities of daily  living (c) for a period of 90 days (d) as a result of the loss of functional capacity; or 
    • The insured requires substantial supervision to (a) guard against threats to health and safety (b) caused by severe cognitive impairment. In both cases, the chronic illness must be expected to continue at least 90 days.
  • A licensed health care practitioner prescribes a written plan of care.

The interpretation of this provision requires reference to the extensive definition provisions. The description of the activities of daily living is a familiar one. The activities of daily living are bathing; continence (bowel and bladder control); dressing; eating; toileting; and transferring (the ability to move from a bed, chair or wheelchair).

A licensed health care practitioner is a physician, registered nurse, licensed social worker, or someone else who meets requirements set by the U.S. Treasury Department. Clearly, the plan of care must be prepared by a skilled professional, another example of the extreme specificity of these policies and the importance of following their terms strictly.

A person suffering from dementia might well qualify for benefits under the first part of the definition of chronically ill, based on the two out of five rule, depending on the extent of the dementia. If not, there is still the second part of the definition, requiring severe cognitive impairment.

Severe cognitive impairment is defined in my policy as “significant deterioration or significant loss in the insured’s intellectual capacity that is measured and confirmed by clinical evidence and standardized tests." Specifically, as they relate to short- or long-term memory, whether the insured knows who, where, and when he or she is, and whether the insured can engage in deductive or abstract reasoning, particularly as it relates to safety awareness. The need for substantial supervision must be proved. Again, you need to understand that coverage is based on compliance with the policy terms and not based on your opinion or your doctor’s.

Most important, of course, is the plan of care that must be adopted. My policy contains a detailed description of what such a plan must contain. It must describe what is to be done, by whom and where. It must also indicate the likelihood of improvement over the  succeeding twelve months and the evidence leading to that conclusion.

My policy goes on to describe the kinds of services for which payment will be made, including adult day care, home health care, hospice and nursing home services. As with the other policy provisions, you need to “fit” the care being proposed into these categories if benefit payments are to be made.

There are several lessons to be learned from my review of my long-term care insurance policy. First, I should have read it carefully when I got it, not five years later. But, having done so, I conclude that it provides benefits for dementia care, either under the two out of five rule or because of a separate determination of severe cognitive impairment. There is a limit on the amount that will be paid under the policy, as well as a detailed requirement of a plan of care and specific information as to the type of services for which payment will be made. To benefit from any such policy, you must, as I’ve said several times, comply strictly with its terms. If you do not, the policy will be of no benefit to you.

Dealing with family members suffering from dementia is often an emotionally draining experience, but obtaining benefits under a long-term care policy will necessitate careful attention to its terms.


Long-term care insurance will generally cover dementia care, but the extent of that coverage will depend on the precise terms of the policy that you have, including the conditions for coverage, the type of care that will be covered, and the dollar limit on benefits. Not everyone will be a candidate for long-term care insurance. Some people will be confident that they have sufficient private resources to cover long-term care costs. Others will be of such modest means that they might qualify for long-term care coverage under Medicaid. But given the very limited long-term care benefits under Medicare and private health insurance, long-term care insurance might be worth considering for many of us.