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.
Qualifying for Benefits
To qualify for benefits, you need to require standby assistance performing two of six activities of daily living as defined below. You can also qualify for benefits if you have a severe cognitive impairment and need standby supervision to protection yourself and others.
Activities of Daily Living:
Bathing – washing oneself by sponge bath; or in either a tub or shower, including the task of getting into or out of the tub or shower with or without equipment or adaptive devices.
Dressing – putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs
Toileting – getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.
Transferring – moving into or out of a bed, chair, or wheelchair with or without equipment such as canes, quad canes, walkers, crutches or grab bars or other supportive devices including mechanical or motorized devices.
Continence – the ability to maintain control of bowel or bladder function; or, when unable to maintain control of bowel or bladder functions, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag)
Eating – feeding oneself by getting food into the body from a receptacle (such as a plate, cup, or table) or by a feeding tube or intravenously.
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, your gender, and the optional benefits you select. Premiums for females are higher than premiums for males, but premiums for long-term care insurance policies purchased through a group are gender neutral.
There are four main coverage options for Long-Term Care insurance policies.
- Benefit Amount: The dollar amount of benefits you are entitled to each day or month once you qualify for benefits and have satisfied your elimination period. You specify the amount you want to receive (monthly or daily). Options typically range from $2,000 to $10,000 per month; the equivalent of $66 to $333 per day.
- Benefit Duration: You choose how long you want to receive your monthly or daily benefit. Benefit durations range from two years to unlimited through a group plan or two to five years for an individual policy. The total benefits provided by your plan are the daily or monthly Benefit Amount multiplied by the Benefit Duration. For example, a $2,000 per month benefit for 3 years would equal a lifetime benefit of $72,000 ($2,000 x 36 months).
- 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 range from 1% to 5% annually multiplied using simple or compound method.
- 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 care givers, like friends or family members;. You do not even need to incur an expense. Benefits are paid solely on the existence of a disability. The benefits are paid directly to you if you are benefit eligible. You can either pay your caregivers with your benefit or use it for something else.
There are two types of Benefit Payment Methods
These are the most liberal policies. They will pay your entire monthly or daily benefit regardless of the expenses you incur during that day or month. Benefits are paid solely on the existence of a disability. However, you must incur some expense.
These are more restrictive policies. You must submit your expenses to the insurance company who will reimburse you for the expenses. If you only have $100 worth of expenses for the day and your daily benefit is $200 per day; you will only receive $100 for the day. However, your benefit will last longer; your benefit duration will be increased.
- Elimination Period: This is your deductible. It is the number of consecutive days or service days during which you must have qualified benefits and be under the regular care of a Physician before benefits are paid. Typical elimination periods are 30, 60, 90, or 180 days.
- Shared Care: This is a joint policy where you can access your partner’s benefit and vice versa.
- 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.
- 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.
- Return of Premium: With this feature, all paid premiums (minus any benefits paid) are returned to the estate or beneficiary of your choice.
- Waiver of Elimination Period for Homecare: With this feature, your elimination period is waived for home care. You receive benefits for home care as soon as you qualify for benefits.
- Waiver of Premium: Premiums are waived once you qualify for benefits and your elimination period is satisfied.
- Cash Benefit with no Elimination Period: If you have a Cash Benefit option, the Elimination Period could be waived.
Factors to Consider When Designing a Long-Term Care insurance policy:
- The cost of long-term care facilities and home care support in your area or the area where you intend to retire.
- Your family history (longevity, Alzheimer’s Disease, Parkinson’s Disease, Arthritis, etc.).
- The availability of family and friend support. Are you concerned about being a burden on your loved ones?
- How much of the long-term care risk do you want to insure?