Traditional LTC Insurance

Traditional long-term care insurance is a stand-alone policy designed specifically to pay for care when you can no longer perform activities of daily living — bathing, dressing, transferring, toileting, continence, and eating — or when a cognitive impairment requires supervision.

Policies are medically underwritten, so applicants generally need to be in reasonably good health at the time of application. The younger and healthier you are when you apply, the lower the premium and the more likely you'll qualify.

Benefits are structured as either indemnity (a set dollar amount paid regardless of receipts) or reimbursement (up to actual expenses incurred). Premiums may be tax-advantaged depending on your situation, and benefits paid are generally received income-tax-free.

The trade-off: premiums can rise, and if you never need care the coverage simply expires without a residual benefit — which is why hybrid designs (Pillar 2) have become increasingly popular.