What you need to know about the USAA long-term care insurance plan
This article reviews the USAA long-term care insurance offering and how it compares to alternatives from other highly rated insurance companies.
Highly Rated Companies
Does USAA offer long-term care insurance?
USAA offers a life insurance policy with a long-term care rider. They do NOT currently offer a stand-alone long-term care insurance policy.
This universal life insurance policy with a long-term care rider is underwritten by John Hancock Life Insurance Company. This type of policy focuses more on the death benefit than the long-term care benefit.
Note: Stand-alone long-term care (LTC) insurance policies are also referred to as traditional long-term care insurance.
Is the USAA long-term care plan right for you?
- This Universal Life Insurance policy uses an accelerated death benefit rider.
- The death benefit of the life insurance policy is also the long-term care benefit amount. If the death benefit is accelerated for long-term care expenses, the death benefit is reduced dollar for dollar, and the cash value is reduced proportionally.
- There is NO extension of benefits like most hybrid long-term care insurance policies. The accelerated death benefit rider only uses the death benefit to pay for long-term care expenses.
- There is NO benefit increase rider (inflation protection) to keep your long-term care benefit in pace with rising long-term care costs.
How to compare the USAA long-term care insurance offer
A good comparison to the USAA long-term care insurance offer is the Nationwide Insurance universal life policy. It makes a great comparison because like the USAA offering, the Nationwide policy is also built on universal life insurance.
A significant difference between these two plans is the Cash Indemnity Benefit included in the Nationwide plan.
How The Nationwide Cash Indemnity Benefit Works
The Cash Indemnity benefit works like this:
- Nationwide Insurance pays the entire long-term care benefit each month
- You have no restrictions on how you use your LTC benefits
- Even your family and friends can be paid to provide care
- The policy will pay 100% of benefits internationally
How Cash Indemnity differs from Reimbursement – Most long-term care insurance policies provide reimbursement benefits. With reimbursement benefits, bills and receipts must be submitted to the insurance carrier for approval. The insurance company then reviews the claim and reimburses the exact amount of approved expenses, up to the amount of the monthly benefit.
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Why Long-Term Care Insurance?
Almost 70% of people turning age 65 today will need some type of long-term care in the future. The average length of time people need care is 3 years.1
One-third of people may never need long-term care, but 20% will need it for longer than 5 years. On average women need 3.7 years of care while men need 2.2 years.2
In 2024, the national average cost for 3 years of long-term care is $340,566 ($113,522 per year). That cost is projected to be $677,652 ($225,884 per year) in 2044.3
Does Medicare Cover Long-Term Care?
No, Medicare does not cover long-term care (custodial care). This type of care makes up more than 90% of all long-term care services. Examples of custodial care is when you need help with walking, bathing, eating, dressing or using the toilet. This is what people need most when they have a physical impairment from a stroke. Or, due to cognitive impairment from dementia or Alzheimer’s disease. Don’t make the mistake of thinking Medicare covers long-term care costs. It doesn’t.
Further, about 80% of care at home is provided by unpaid caregivers. More than half of this care includes intensive caregiving assistance with personal care such as bathing or feeding.4 And it’s not only seniors that need long-term care. Over 35 percent of people currently receiving care are between the ages of 18 and 64.5
Which type of insurance is best for your situation?
- Traditional Long-Term Care Insurance
- Hybrid Life Insurance with LTC
- Long-Term Care Annuities
- Short-Term Care Insurance
Traditional Long-Term Care Insurance
- The most comprehensive long-term care protection for your dollar
- The broadest set of options, including inflation protection
- About half of all long-term care policies purchased
- Recurring premiums
- Learn more about Traditional LTC >
Hybrid Life Insurance with Long-Term Care
- A permanent life insurance policy that can be used during your lifetime if you need long-term care
- If care is not needed, your asset passes to your estate as a tax-free death benefit
- May build cash value and have a return of premium option
- Premiums will not increase and 1035 exchanges possible
- Learn more about Hybrid Life with LTC >
Hybrid Annuity with Long-Term Care
- A deferred annuity contract with a fixed interest rate and possible indexing for asset growth plus long-term care benefits
- If not exhausted paying for long-term care, the annuity will transfer to your estate
- Long-term care benefits are typically double or triple the value of the annuity
- Premiums will not increase and 1035 exchanges possible
- Learn more about Hybrid Annuities with LTC >
When To Buy Long-Term Care Insurance
Like most advisors, we recommend buying long-term care insurance in your fifties or early sixties for the following reasons:
- The younger you are when you buy a policy, the lower the annual premiums
- By the time you reach your mid sixties, you’re more likely to have a medical condition that makes you ineligible for a preferred-health discount, or makes it tough to get coverage at all
- Even though you pay premiums a longer period of time, you’ll typically pay less overall than someone buying at an older age
So it almost never pays to wait. And, while you’re waiting, you’re uninsured. If an accident or illness happens causing you to need long-term care, you’ll have to pay out of pocket.
How Much Does LTC Insurance Cost?
Your long-term care insurance rates will depend on your age, health history, plan design and type of coverage selected. The following choices let you choose how much protection is right for your situation:
- Benefit Period
- Daily Benefit
- Elimination Period (a deductible in days)
- Inflation Protection (if chosen)
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About the Author: Craig Matesky
Reviewed by: Mike Berger