Long-Term Care Insurance: What It Actually Covers in Michigan

There is a particular phone call we get every few months. An adult child is going through a parent's filing cabinet, and they have found a long-term care insurance policy. Premiums have been paid for fifteen or twenty years. Nobody in the family knows what it covers, whether it applies to a home like ours, or how you even start a claim.

It is a good problem to have. It is also worth solving before you need it rather than during the week you need it. Michigan has its own rules about what these policies must include, and one of them catches families here in a way that surprises even the people who sold the policy.

What the Policy Is Actually For

Long-term care insurance covers custodial care, which is the help most people eventually need and which health insurance does not pay for. Michigan's Department of Insurance and Financial Services describes it as assistance with the basic tasks of everyday life: bathing, dressing, using the toilet, transferring to and from a bed or chair, caring for incontinence, and eating. Policies often extend to the practical tasks around those, such as meal preparation, managing medication, and responding to an emergency alert.

That is the gap it fills. Medicare pays for short skilled stays after a hospitalization and does not pay for ongoing custodial help, so a long-term care policy is one of the few private products that reaches the actual cost families face.

Michigan's Baseline Requirements

Michigan's long-term care insurance law dates to 1992, and it sets a floor that any policy sold here has to clear.

A policy titled and sold as long-term care insurance must cover care in an intermediate care or skilled nursing facility, and it must also cover home care services in a dollar amount equal to at least half of one year's nursing home coverage available under that policy (MCL 500.3907(4)). That is worth reading twice, because it is easy to get backwards: the law sets a floor on the total home care dollars a policy makes available, not on the daily home rate. A policy is not required to pay half its daily facility rate for a day of care at home. Policies that cover only home health care, or only facility stays, are allowed, but they must be titled so a buyer can see the coverage is limited.

Every policy has to be guaranteed renewable, which means the company cannot cancel it as long as premiums are paid. The premium itself is not guaranteed, and we will come back to that.

Every buyer gets a thirty-day free look. Change your mind in that window and you get every dollar back. Cancel after it, and the company owes a prorated refund of that year's premium. If a policy has not arrived within sixty days of purchase, call the company directly.

Insurers must offer inflation protection that compounds benefits at five percent a year or better. Most people focus on the premium and decline it, which is understandable and often expensive later, because a $150 daily benefit chosen in 2006 buys very little in 2026. Worth knowing: once you decline the offer, the company never has to make it again.

The Line That Blocks Claims in Michigan

Here is the piece we most want Michigan families to check, and it comes straight from DIFS's own shopping tips rather than from us.

Michigan does not license anything called an "assisted living facility." That phrase is marketing, not a license category. What this state actually licenses are adult foster care homes, regulated under Act 218 of 1979, and homes for the aged, regulated under the Public Health Code. Both of our Troy homes are licensed adult foster care homes. There is no Michigan license with the words "assisted living" on it for anyone to hold.

Many long-term care policies, especially older ones written for a national market, promise benefits only for care in a "licensed assisted living facility." Read literally in Michigan, that describes a category with no members. DIFS advises buyers to make sure a policy does not restrict payment to licensed facilities in that way, and if it does, to get written confirmation from the company that it waives the requirement for Michigan residents.

If a parent already holds such a policy, do not wait for a claim to find out. Call the insurer, describe the setting in Michigan's own terms, adult foster care or home for the aged with a license number you can read to them, and ask them to confirm in writing that care in that setting is covered. Put the letter with the policy. Ask the same question of any home you are considering: what license do you hold, and what is the number. A home that cannot answer that quickly is telling you something.

Benefit Triggers and the Waiting Period

A policy does not pay because a doctor thinks care is a good idea. It pays when the policy's own benefit triggers are met, and those are written in a section usually titled "Eligibility for the Payment of Benefits."

Most tax-qualified policies use a two-part standard: a person needs substantial assistance with at least two activities of daily living and is expected to for at least ninety days, or has a severe cognitive impairment requiring substantial supervision. That second path matters for dementia, where someone may still dress and eat independently while being genuinely unsafe alone.

Read the trigger language before you need it, because the exact wording varies and it decides everything. Then look for the elimination period, which is the number of days of care you pay for yourself before benefits start, commonly thirty to ninety days. Families are often caught by this, having budgeted for the monthly cost and not for the first two or three months of it.

Michigan also allows an insurer to impose a waiting period of up to six months for a pre-existing condition. After those six months the condition cannot be limited or excluded.

Premiums Can Rise, But Not Quietly

Long-term care premiums are not locked. Insurers across the industry have raised rates on older policies, and Michigan permits it with two guardrails: the increase has to be filed with DIFS and approved, and the company has to notify the policyholder at least forty-five days before it takes effect.

If a parent gets one of those letters, the choice is usually to pay more, reduce the daily benefit, shorten the benefit period, or drop inflation protection. It is a decision worth making with the actual policy in hand rather than under deadline. DIFS will answer questions at 877-999-6442.

The Partnership Program and Medicaid

Michigan participates in the federal Long-Term Care Partnership program, and it is the most useful feature of these policies that almost nobody knows about.

A Partnership-qualified policy earns a dollar-for-dollar Medicaid asset disregard. If the policy pays out $300,000 in benefits and those benefits are exhausted, $300,000 of otherwise countable assets is disregarded when Medicaid eligibility is determined, and disregarded again by estate recovery after death. For a family hoping to leave something behind, that is real money.

Two cautions. Owning a Partnership policy does not make anyone eligible for Medicaid; the income and asset tests still apply, and the disregard only changes the asset side. And a policy has to actually be certified as Partnership-qualified, which requires tax-qualified status and the appropriate inflation protection. An older non-Partnership policy cannot simply be relabeled. Michigan's program also has reciprocal agreements with other Partnership states, though it is worth confirming that a particular state will honor the policy rather than assuming.

The 2026 Tax Treatment

Benefits from a tax-qualified policy generally come to you tax-free. For indemnity policies that pay a flat daily amount whether or not you spent it, the IRS sets a per diem limit, and for 2026 it is $430 a day, up from $420. Benefits above that are tax-free only to the extent of actual qualified expenses.

Premiums are deductible as a medical expense, subject to age-based caps. For 2026 those limits are $500 at age 40 or under, $930 from 41 to 50, $1,860 from 51 to 60, $4,960 from 61 to 70, and $6,200 above 70. The band is set by attained age at the end of the tax year, so a birthday in December moves you up for that whole year. Most families do not clear the threshold to itemize medical expenses, so treat this as a checkable possibility rather than a plan.

What This Pays For Here

Even a good policy rarely covers the whole cost. Assisted living in Michigan runs about $5,818 a month at the 2025 median, and what any particular home charges depends on the setting and the level of care a resident needs. A policy paying $150 a day comes to about $4,500 a month, which is substantial and is usually not all of it. The rest comes from Social Security, a pension, savings, or the sale of a house. Families who plan around the gap rather than around the benefit are the ones who do not get surprised.

If a parent's care needs are rising and the money question is the one keeping you up, the Michigan-specific programs are worth reading alongside this. Our guide to the MI Choice waiver covers the Medicaid path when private funds run short.

And if you want a second set of eyes on what a policy will actually pay for in a home like ours, call us at (248) 266-2738 or write to [email protected]. We are glad to tell you what to ask your insurer, and we would rather you find out the answer now than in a hospital hallway.