What Goes Into a Long Term Care Insurance Policy?
Long-term care insurance is tailor made insurance; meaning that the choices you make in designing the appropriate policy affect the premium you pay. Finding the right plan for you is the reason most people find it beneficial to meet and work with a Long Term Care Insurance Specialist. Not only is Allison Harris a Long Term Care Insurance Professional, she is also a Certified Senior Advisor (CSA). The thing that drives us at Imagine Insurance Advisors is helping you to make sure the policy you purchase today will do what you want it to do in the future.
While there are standard features included in a long-term care insurance policy, you can control the premiums you pay and the benefits you receive when selecting the various amounts of benefit within the policy. Below are descriptions of the most common benefit choices in long term care insurance policies.
- The Company
- Monthly or Daily Benefit
- Benefit Period
- Elimination Period or Deductible
- Home Care Amount
- Inflation Protection
One of the most important decisions you can make is choosing the company you select to do business with. Your health may limit the options you have available to you. This is one reason it is important to look at long term care insurance while you're in good health. There are a number of major areas to look at when choosing a carrier. You will want a company that has been in the business at least 10 years, one that shows they are serious about the long term care insurance business. Look for a company that has hundreds of millions of dollars of in-force policies.
The best carriers are more conservative in the risk they choose to take on. Companies that insure people that most other carriers decline to cover will have more policyholders that may make claims sooner than those with a healthier policyholder pool. It is wise to check out the financial strength and claims paying abilities from several rating agencies. At Imagine Insurance Advisors we can help you find the best companies available to you based upon your health. We can give you all the options available to you and help you select the best choice.
The monthly or daily benefit you select is the maximum dollar amount that the insurance company must pay for your covered long term care expenses on any given day. Some policies that pay a daily benefit pay this out as a weekly or monthly benefit, which allows you to receive benefits for expenses on specific days that are greater than your daily benefit. When choosing your benefit amount, make sure you know accurately the cost of care in your area.
With a reimbursement policy, most companies will allow the amount of the monthly or daily benefit that you did not use to be carried over, which extends your benefit period. For example, if your monthly benefit amount was $5,000 and your expenses were only $3,000, then the remaining $2,000 could carry over for later use. This would allow a three-year plan to last longer than three years.
The benefit period you select is the minimum amount of time that you will receive benefits. When you select a benefit period, it is expressed in either months or days. This can range anywhere from two years to unlimited years (lifetime coverage). The benefit period is multiplied by the benefit amount you chose to equal a lifetime maximum, or benefit account from which benefits are paid. For example, if you purchased a six-year benefit period with a monthly benefit of $5,000, this would give you an instant pool of money (lifetime maximum) of $360,000 (72 months x $5,000/month) to use for long-term care expenses. If you don't use the entire monthly amount or if you don't require care every day, your benefit account may last longer than the chosen benefit period.
The elimination period is also known as a deductible. This is similar to the deductible you are used to in other types of insurance that you carry. The elimination period is the length of time you must pay for long-term care services yourself before the insurance policy begins to pay benefits. For most elimination periods, days are counted as days of service. This means that on each day you receive care, that day satisfies a day of the elimination period. Where this is most important is home care. If you are at home and only get care every other day, a 30 day elimination period would take 60 days calendar days to satisfy.
Some companies offer options such as waiving the elimination period for home care. Your benefits begin right away at home and each day you receive benefits satisfies a day of the elimination period. This provides the best coverage for at home care. A common option is a calendar day elimination period. This counts calendar days versus days of service for satisfying the elimination period. Most elimination periods need to be satisfied only one time regardless of where you receive your long term care service.
The younger you are, the more important it is to consider the FUTURE cost of the deductible, since the cost of long-term care is expected to increase with inflation. It may be more cost effective over the long run, to select a smaller deductible.
This benefit provides for home health care in your home. Home care can include skilled care like nurses and therapists, but most commonly consists of home health aides, personal care attendants, homemaker services, and chore services. Adult Day Care is typically included in this category.
The home and community care benefit an insurance company pays is usually based on a percentage of the daily or monthly benefit. Many companies provide up to 100% of your monthly amount to be available for home or community care. Some policies will pay only a percentage of the benefit for care at home or in the community. Typical percentages for home care include 50%, 75% or 80%. One thing to consider is that a majority of the people who receive care are able to at least start receiving care in their own home first before they need to go to a facility. Be sure you consider that fact before you scrimp on coverage where you might need it most.
You never know when it is that you'll need long term care. It could be 3 years from now; it might be 30 years from now. You want to feel comfortable that your policy will pay for your care in the future. Inflation protection helps take care of tomorrow. You can design a plan based upon today's costs and with the addition of inflation protection you can take into account the rising costs of long term care. These options increase your benefits over time. If inflation for long-term care runs 5% annually, a nursing home that now costs $6,000 per month could be charging more than twice as much a month in 15 years. Without this protection, your policy will cover less than half of your care costs at that time.
If you think it will be at least 15 years before you may need care, then compound inflation protection makes more sense because it will increase the benefit amount faster and to a greater degree in the long run. If you are 70 years or older, 5% simple increases may be sufficient for your needs. One thing to consider is how long you think you may live.
There are multiple options for inflation protection. There are step rates, simple, and compound options. If you are considering a partnership plan, ensure you acquire the appropriate inflation protection for your age to meet the partnership requirements.
|Less than 61 years||Compound|
|75+ years||None Required|