Long Term Care Insurance

How to Design a Long Term Care Insurance Policy to Best Meet Your Needs

A smart way to design the Long Term Care policy that will best meet your needs is to consult with a Long Term Care Insurance Specialist. These are licensed insurance representatives who are dedicated to understanding all aspects of Long Term Care and usually represent multiple quality insurance carriers. When consulting with a Long Term Care Specialist, ask if he or she has earned the CLTC designation. Your Long Term Care Specialist will review the following information with you and help you design a suitable policy that takes into consideration any personal preferences.

Policy and Benefit Choices

The following is a summary of policy and benefit choices:

• Long Term Care Insurance policies have a maximum benefit period or lifetime benefit maximum, which is the total amount of time or total amount of dollars up to which benefits will be paid. Common benefit periods are three years, four years or five years. Other options may be available, and it should be observed that most policies translate these time periods into dollar amounts - and do not actually limit the number of days for which they will pay for care - but the overall dollar amount that will be paid. There used to be many companies, but now only a few currently are offering coverage with lifetime (unlimited) benefits. Lifetime benefits may be considered the "Cadillac" of Long Term Care Insurance plans.
• You select a daily benefit amount (for example, $100/day), which is the maximum daily amount of expenses for care the policy will pay. Most policies let you choose from $50/day to as much as $500/day. A growing number of policies specify benefits in terms of a maximum monthly amount so that you have the flexibility to receive more care on some days (for example, when family care is not available) and less care on other days.
• Often you can choose whether you want the policy to pay the same daily benefit amount for care in all settings, or whether you want the policy to pay less for care in less costly settings, such as home care. Common choices include a home care benefit of 50%, 75% or 100% of the daily nursing home benefit amount.
• You choose a maximum lifetime benefit you want the policy to provide, which is often calculated as the product of your selected maximum benefit period and daily benefit amount. For example, a three year benefit plan at $100/day of benefits would provide you with a total "pool of money" of $109,500 for care.
• You choose the type of coverage you prefer - "comprehensive" or "facility care only." Comprehensive policies cover a wider range of care settings including both in-home care and various types of facilities. Most policies purchased today are comprehensive, but some people may still prefer facility care only policies.
• Many policies offer optional benefit riders that allow you to customize your coverage. One critical benefit component to review is inflation protection, which helps protect you against the rising cost of care over time. There are many available forms of inflation protection, including automatic compound inflation at a pre-set rate, CPI-based inflation protection, and the guaranteed right to purchase additional coverage at future points in time. Some people opt to just buy a higher initial daily benefit and no inflation protection rider, but the safest route is to include a provision for future inflation increases to your policy benefits. If purchased, inflation protection riders usually increase both your selected daily benefit amount and maximum lifetime benefit amount.

Additional Costs Long Term Care Insurance Sometimes Covers

Many policies may also pay for services or devices to support people living at home:

• Equipment such as in-home electronic monitoring systems
• Home modification, such as grab bars and ramps
• Transportation to medical appointments
• Training for a friend or relative to learn to provide personal care safely and appropriately

Some policies provide payment for family members or friends to help care for you, but may provide payment on a limited basis or require training of the informal caregiver. Many policies provide the services of a care coordinator, usually a nurse or social worker in your community. The care coordinator can meet with you and discuss your specific personal situation, and help arrange for and monitor your care. The care coordinator's help is usually optional - you use it if you need and want it - and you are not limited to the providers that the care coordinator may recommend.

What Does Long Term Care Insurance Not Cover?

Like other forms of insurance, Long Term Care Insurance policies have exclusions. These are listed in both the Outline of Coverage you receive before you apply, as well as in the policy after you have purchased coverage. These exclusions often follow state regulations on what exclusions are permitted. Long Term Care Insurance policies may exclude some or all of the following (even if you meet other requirements of the policy):

• Care or services provided by family member unless the family member is a regular employee of an organization that is providing the treatment, service or care; and the organization they work for receives the payment for the treatment, service or care; and the family members receives no compensation other than the normal compensation for employees in his or her job category.
• Care or services for which no charge is made in the absence of insurance.
• Care or services provided outside the United States of America, its territories or possessions; however a growing number of policies now have an international care benefit that can provide care outside of the United States.
• Care or services that result from war or act of war, whether declared or not.
• Care or services that result from an attempt at suicide (while sane or insane) or an intentionally self-inflicted injury.
• Care or services for alcoholism or drug addiction (except for an addiction to a prescription medication when administered in accordance with the advice of Your Physician).
• Treatment provided in a government facility (unless otherwise required by law).
• Services for which benefits are available under Medicare or other governmental program (except Medicaid), any state or federal workers' compensation, employer's liability or occupational disease law, or any motor vehicle no-fault law

The early generations of Long Term Care Insurance policies generally did not provide any payment for care delivered by a family member, friend, or other individual not licensed as a caregiver. More recently, however, Long Term Care Insurance policies have introduced innovations such as providing cash payment for each day that you receive care from anyone, even if it's a family member or friend. These policies often carry a higher price tag, but they allow more flexibility in using benefit dollars. Most policies provide training and support for family and friends who provide care.

Some policies provide coverage for care related to everyday household needs such as housekeeping, laundry, meals, and managing medications (so-called "instrumental activities of daily living"), but only when you receive that help as part of the help you get from a paid care provider for assistance with Activities of Daily Living (bathing, dressing, toileting, etc.). So most policies will not pay for in-home help if all you need is help with services such as housekeeping, meals, laundry, and transportation.

How Do You Pay Long Term Care Insurance Premiums?

Different policies offer different payment options. With most policies, you remit premiums by check or automatic bank draft according to a schedule you select - monthly, quarterly, semi-annually or annually. Typically you pay premiums until you begin to receive benefits; then premiums are waived while you continue receiving policy benefits. With most policies, you pay premiums for life as long as you are not receiving benefits; however some policies offer limited-payment plans such as 10, 15 or 20 years.

For example, with a 10-pay plan there is an annual premium for 10 years and then your policy is paid up. If you claim benefits during the first 10 years, you'll go on premium waiver and won't have to remit any premium as long as you're receiving benefits. Limited payment plans offer the advantage of some protection against possible future premium increases, which can be implemented (subject to regulatory approval) on a class basis on policyholders who purchased the same policy form in your state. Once you make it past the limited payment period, your coverage is fully paid-up and therefore you would not be impacted by any rate increase implemented on your policy form.

When Are LTC Benefits Paid?

When benefits are paid is based on the policy's "benefit trigger," along with the length of the elimination period you choose. Policies use objective measures to determine when you need LTC. These are called 'benefit triggers.' Most policies use daily living activities and cognitive impairment as triggers for benefits. The policy pays benefits when you need help with two or more of the six Activities of Daily Living, or when you have a Severe Cognitive Impairment.

Benefits begin to be paid after your selected elimination period has elapsed. This is the number of days between when a benefit trigger occurs and when you receive payment for services. The elimination period is similar to the deductible you have on your car insurance, except it is usually specified as a period of time rather than a dollar amount. Most policies allow you to choose the length of the elimination period from options such as 30, 60 or 90 days. During the elimination period, you are responsible for the cost of any services you receive. Policies differ with regard to whether you are required to receive care for the specific number of days on a calendar-day or service-day basis.

Once you are eligible for benefits, most policies reimburse the costs you incur for covered services up to the applicable daily limit. Some policies on the market now will pay a pre-set cash amount for each day that you meet the 'benefit trigger' whether you receive paid long-term care services or not. These "cash disability" policies offer greater flexibility but are also significantly more expensive.

Back to Top | Back to Long Term Care Home

• Why You Need to Have a Plan for Long Term Care
• Won't the Medicare Program Pay for My Long Term Care Costs?
• Will Public Assistance (Medicaid) Pay for My Long Term Care Costs?
• What Is the Cost of LTC Services Where I Live?
• What Is Long Term Care Insurance and How Much Does It Cost?
• How to Design a Long Term Care Policy to Best Meet Your Needs
• What are "Partnership" Long Term Care Policies?
• Financial Strength Ratings for Top Long Term Care Insurance Companies