Long-Term Care Insurance

Long-Term Care insurance helps pay for care in your own home, in a nursing home, and in an assisted living facility. Long-Term Care insurance policies can be purchased individually or through a group.

Premium rates for Long-Term Care insurance vary greatly and are affected by such factors as the amount and length of coverage selected, your age on the effective date of the policy and the optional benefits you select. In addition, there are basic differences in policy design, especially as relates to coverage for home care.

Though it is easy to compare premiums, it is very important to understand the differences between policies, especially on how benefits are paid. Differences between policies fall into five key areas:

Access to Benefits
Waiver of Premiums
Who can provide the care at home
How benefits are paid
Satisfying the Elimination Period

The easier you can qualify for benefits and the more liberally the policy will pay benefits (waive premiums), the better value it is for you.

Long-term care insurance policies allow you to structure your policy by allowing you to choose from four main benefit options. Many policies offer other options.

  1. Benefit Amount: You specify the amount you want to receive (monthly or daily) once you qualify for benefits. Options typically range from $2,000 a month to $9,000 a month.
  2. Benefit Duration: How long do you want to receive your daily or monthly benefit once you have become benefit eligible? Durations range from two years to unlimited through a group plan or two to five years on an individual plan. The total benefits provided by your plan are the daily or monthly Benefit Amount X the Benefit Duration. $3,000per month for 3 years = $108,000.
  3. Inflation Protection: Since you typically won’t qualify for benefits until many years after you purchase the policy, many insureds choose the inflation protection option, so that their benefits keep up with the rising cost of care and inflation. Inflation protection options are 2% – 5%, simple or compound inflation.
  4. Type of Homecare: You can choose professional homecare that requires that homecare be provided by licensed caregivers from licensed agencies. Strict record keeping is required. Alternatively, you can choose Informal Care; also known as Total Homecare. This option allows you to receive care from unlicensed friends or family members still get paid benefits. The benefits are paid directly to you based solely on the existence of your disability. You can either pay your caregivers with your benefit or use it for something else.

Other Options:

  1. Elimination Period Duration: Your Elimination Period serves as your deductible. It is the period- of- time after you qualify for benefits, but before your policy pays benefits to you. A typical elimination period is 90-days.
  2. Shared Care: This is a joint policy where you can access your partner’s benefit and vice versa.
  3. Survivorship: With this feature, if a husband or wife passes away, the surviving spouse’s premium can be waived permanently. Usually the policy must be in force for 10 years with no claims paid.
  4. Cash Benefit: With this feature, once you qualify for benefits, you receive a portion of the full cash benefit of your monthly or daily benefit amount even if you incur no long-term care expenses. An example of this would be if you receive care from a family member or a friend.
  5. Return of Premium: With this feature, all paid premiums (minus any benefits paid) are returned to the estate or beneficiary of your choice.
  6. Waiver of Elimination Period for Homecare:  With this feature, your elimination period is waived for home care. you receive benefits for home care immediately.

Factors to Consider When Designing a Long-Term Care insurance policy:

  1. The cost of long-term care facilities and home care support in your area or the area where you intend to retire.
  2. Your family history (longevity, Alzheimer’s Disease, Parkinson’s Disease, Arthritis, etc.).
  3. The availability of family and friend support. Are you concerned about being a burden on your loved ones?
  4. How much of the long-term care risk do you want to insure?

Employer Sponsored Long-Term Care Insurance Plans

True Group Long-Term Care Insurance Plans

True Group Long-Term Care Insurance Plans are designed for the workplace and enable employees to purchase guaranteed issue coverage. Group policies guarantee a certain amount of coverage to all employees regardless of age. True group plans offer a few basic plans with limited options to ensure a smooth enrollment and minimize employee confusion. The plans can be totally voluntary (employee paid) or be partially or fully employer funded.

Multi-Life Long-Term Care Insurance Plans

Multi-Life Long-Term Care Insurance Plans can be offered to groups of all sizes, but do not provide “guaranteed issue” to employees. Multi-Life Plans have reduced underwriting requirements and, like individual policies, have a broad range of policy options, and some discounts such as for preferred health risks. Multi-Life Plans can be totally voluntary (employee paid) or be partially or fully employer funded.

Executive Carve-Out Long-Term Care Insurance Plans

Executive Carve-Out Long-Term Care Insurance Plans are essentially multi-life group plans where the employer pays for a base plan for key employees. Underwriting criteria is simplified, and a full range of policy options are available , as are certain discounts such as for preferred health risks. The employer pays for a core plan for the eligible key employees, and the employees are able to “buy up” to more complete benefits. There are tax advantages to employers and employees for implementing Executive Carve-Out Plans.


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