The Basics of a Long Term Care Insurance Policy CoverageLTC) refers to services and supports which help people with chronic medical conditions, illnesses, or disabilities on a daily basis over an extended period of time. It can be expensive and can easily exhaust your assets if you don't plan ahead with long term care insurance (LTCI).
Long term care insurance helps pay for your LTC expenses and protects your funds from being used as payment for care. But exactly what long term care expenses are covered by LTCI policies?
Covered Long Term Care ServicesWhile some insurance companies will require you to use services from a certified home care agency or a licensed professional, other companies will allow you to hire independent or non-licensed providers or family members.
Make sure you purchase a policy that covers the types of programs, services and facilities you'll need and available where you live.
Long term care insurance policies may cover the following care arrangements:
- Nursing home
- Assisted living
- Adult day care services
- Home care
- Home modification
- Future service options
Coverage Amounts and LimitsLong-term care insurance policies pay different amounts for different services, or they may pay one rate for any service. Be sure to assess which type of policy coverage will work for you since you'll be selecting the benefit amount and duration of the policy.
Insurers will let you know about some type of limit to the amount of benefits you can receive from a policy.
To find out how useful a policy will be to you, compare the amount of your policy's daily benefits with the average cost of care in your area. Remember; you'll have to pay the excess costs exceeding your daily amount.
Qualifying for BenefitsConditions that must be met or happen before you start receiving your benefits are called "benefit triggers." Most insurers evaluate your inability to perform certain "activities of daily living" (ADLs) to determine when you can start to receive benefits.
It's common for benefits to begin when you need help with two or three ADLs. Requiring assistance with eating, bathing, dressing, walking, using the toilet, and remaining continent are the most common ADLs that need assistance.
Mental-function tests are commonly used as benefit triggers for people with cognitive impairments. Ask your insurer whether you must require someone to perform the activity for you or with you, rather than just stand by and supervise you, in order for you to trigger benefits.
Coverage ExclusionsAll policies exclude coverage for specific conditions. Ask your LTC agent about these exclusions. Certain states have outlawed companies from requiring you to have been in a hospital or nursing facility for a specific number of days before qualifying for benefits. However, some states continue to permit this exclusion and it may keep you from ever qualifying for a benefit.
There are also coverage exclusions, which are quite common, for mental disorders, drug and alcohol abuse, and self-inflicted injuries.
Make sure that Alzheimer's disease, certain forms of cancer, and other common illnesses, aren't mentioned as reasons not to pay benefits.
Waiting or Elimination PeriodsMost policies include a waiting or elimination period, which can typically be chosen from zero up to 100 days before the insurance company begins to pay. During this period, you will be paying for care out-of-pocket. The longer the elimination period, the lesser the policy costs.
Be sure to estimate how many days you can afford to pay on your own before receiving benefits.
Get a policy that requires you to satisfy your elimination period only once during the life of the policy instead of making you wait after each new illness or need for care.
Long-term Care Benefits and InflationMany people purchase long-term care insurance between 10 to 30 years before they start receiving benefits. Inflation protection is an important option to consider. Indexing to inflation allows your daily benefit to keep up with the rising cost of care.
When you buy LTCI under age 70, it's probably better to have automatic "compound" inflation protection. Compound inflation protection is the amount of your daily benefit will be increased based on the higher amount of coverage at each anniversary date of the policy.
"Simple" inflation protection increases your daily benefit by a fixed percentage of the original benefit amount. Typically, the simple option won't keep pace with the price of services.
If you decide turn down the option several times, you may not get the option anymore and lose the ability to increase the benefit in the future. Not increasing your coverage may leave you with a policy that covers only a fraction of your cost of care. The younger you are when you buy long-term care insurance, the more important it is to buy a policy with inflation protection.
By Aris Moreno