Long Term Care Insurance

Long Term Care Insurance

We have different options when planning for retirement, through the use of savings plans and investment strategies. Most of us purchase health insurance to protect ourselves and families from medical emergencies. We purchase life and disability insurance to protect our loved ones from an untimely death or disability. But have you given any thought to what might happen if you or someone you love need long term care?

Long term care insurance provides you with the flexibility you want along with the protection you’ll need. Understanding the unique features associated with long term care insurance coverage can help you make educated decisions, have more control and feel secure about your future. In developing your policy, you need to work closely with one of our professional advisors who will explain and guide you through the various features and options available from our portfolio of long term care insurance companies. The following information explains the different components that will help you design the long term care insurance policy that best meets your needs.

Where can I receive long term care services?

Most long term care insurance policies offer benefits for facility care or home care. Facility care covers services received in an assisted living facility or nursing home.

Facility Care

Home Care

Nursing HomeAdult Day Care
Adult Foster CareHomemaker Services
Assited LivingPersonal Care Services
Bed ReservationHome Health Care
Respite Care 
Hospice Care 

What if I want to receive long term care at home?

Assisting individuals stay at home is a top priority of long term care insurance coverage. Most long term care insurance policies provide benefits or payments for services received at home. Many long term care insurance policies are designed to cover items and services that will help you maintain your independence and lifestyle: A few of these items and services may include:

  • Assistive and Technological Devices
  • Durable Medical Equipment not covered by Medicare
  • Home Modifications
  • Transportation Services
  • Emergency Medical Response Systems
  • Caregiver Training

Will I have to pay premiums once I begin receiving long term care insurance benefits?

Once the elimination period (or waiting period) has been satisfied, the Waiver of Premium feature included on most long term care insurance policies will waive premiums on the day following completion of the elimination period. Provided you continue to be eligible to receive benefits from your long term care insurance policy premiums will be waived.

Can the premiums I pay ever be increased?

Long term care insurance companies attempt to do their best to maintain stable premiums; however rates can go up for a group of policy holders with a policy similar to yours. In cases where a premium increase occurs and goes beyond certain percentages and you feel you cannot afford the increased cost, most policies offer two options:

  1. Reduced benefits at the premium in effect prior to the increase; or
  2. A reduced lifetime maximum benefit equivalent to (a) total premiums paid; or (b) a multiple of your facility daily benefit.

What does “pool of money” mean?

Pool of money is the total amount of money available under a long term care insurance policy. This is calculated by multiplying your initial daily (or monthly) benefit times the number of days (or months) in your benefit period. When your pool has been established, it will be affected by inflation protection increases and any claims that may have been paid out.

As an example, if you choose a daily benefit of $300 and a benefit period of five years, your initial “pool” will be $300 X 365 days X 5 years or $547,500. It is also important to note that although you may have chosen a 5-year benefit period, if there is still money left in the pool after year five, you would still be able to receive benefits until your entire “pool” has been spent.

How will I know if I’m eligible to being receiving benefits?

In order to be eligible to receive long term care insurance benefits, a licensed health care practitioner must certify you as having a chronic illness or disability. Most carriers’ definition of a chronic illness or disability is the inability to perform (without substantial assistance) a minimum of two Activities of Daily Living (ADL), as a result of a loss of functional capacity. ADLs include bathing, dressing, continence, transferring, toileting, and eating. The inability to perform these must be anticipated to last a minimum of 90 consecutive days.

You may also be eligible to receive benefits in a situation where you suffer a severe cognitive impairment that requires supervision in order to protect your health and safety.

Upon certification of a chronic illness or disability, a plan of care will be developed based on your needs.

LONG TERM CARE INSURANCE BASE PLAN OPTIONS

For how many years do I want to receive long term care insurance benefits?

Once care begins, your choice of a specific benefit period will determine how long your coverage could last.

It is important to note that most people do not move directly into a nursing home. Many go there only after they have first been receiving long term care services in their home or in an assisted living facility. You should also consider your current health and take a close look at your family’s health history to determine if you may be genetically predisposed to any conditions.

Lastly, you should also consider what portion of risk you want to assume. In other words, how long and for how much are you going to be willing to pay “out-of-pocket” for long term care services? In most cases regarding long term care insurance, some coverage is better than no coverage at all.

How much coverage do I want in a facility?

The amount of insurance benefit you receive in dollars per day is called the Facility Daily Benefit. This is the maximum dollar amount of benefits available to you on a given day.

You may choose from a minimum benefit of $50 or more per day in increments of $10. The amount of benefit you choose should be determined by how much you think it might cost you per day to stay in a facility and how much you think you might be willing to pay on your own. The cost of long term care varies by state and region within the state. Learn more about long term care costs in the area in which you believe you will be using long term care.

How much coverage do I want in my home?

For many of us, the opportunity to stay in our own homes for as long as possible is an important part of our overall long term care plan. A home care daily benefit is the maximum dollar amount of benefits available to you on a given day toward your home care services which can take place in:

  1. Your own home where you can receive care from a licensed nurse or physical, occupational or speech therapist. Services might also include care from a home health aide or homemaker services from an agency.
  2. An adult day care center where you can receive a program of care in a center during the day and then return to your own home at night.

Depending on the long term care insurance company, the options available for your home health care benefits can be 50%, 75%, or 100% of the facility daily benefit. Some long term care insurance policies only offer a 100% option. This is an important feature if you plan to receive long term care services where the cost of facility care is much higher than the cost of home care services.

What options do I have when receiving benefits for home care?

Once you have met the eligibility criteria to receive benefits from your long term care insurance policy the following options are available through most policies. However, you must select which option you would like prior to purchasing the policy.

Daily Benefit Option. This option allows you to receive reimbursement up to the amount of your home care daily benefit for qualified long term care expenses.

Monthly Benefit Option. This option does not have a daily benefit limit that you can claim for reimbursement of qualified long term care expenses. Instead, you will receive reimbursement up to the total monthly benefit calculated by multiplying the home care daily benefit by the number of days in the month. This feature is built-in to the policy with certain long term care insurance policies or offered through a policy rider. Some policies do not make this option available.

How long will I want to wait before receiving benefits?

Similar to a deductible, the elimination (waiting) period is the time you will have to wait prior to being eligible to receive benefits. Choosing a longer elimination period is similar to choosing a larger deductible, and as a result will reduce premiums.

Long term care insurance policies usually have a calendar day elimination period (this can vary by carrier and product). This means that when you are certified as having a chronic illness or disability each day will be counted towards satisfying the elimination period, regardless of whether a qualified long term care service is used.

Long term care insurance policies offer a number of different elimination period options ranging from zero to 365 days. Individuals usually have to satisfy the elimination period only once during their lifetime. In addition, some policies also offer a Waiver of Elimination Period for Home Care Rider, which can reduce the elimination period for home health care to zero days.

How can I protect myself against inflation and the rising cost of long term care services?

The average cost of a semi-private nursing home room in the United States is $196 per day or greater than $70,000 per year.1 Over a six-year period the national average annual growth for the cost of long term care services has increased five percent.2 Long term care insurance policies offer a number of different inflation protection options to allow your policy to keep pace with the rising cost of long term care services. The most common inflation protection options are listed from least to greatest. Each inflation option, with the exception of none, are available as an additional cost.

None. This option doesn’t provide any inflation protection. This means your benefits will not increase over time.

Guaranteed Purchase Option. This option allows the policy owner to increase policy benefits every three years without having to provide evidence of insurability. The increase is usually five percent of the facility and home care benefit amounts, compounded on an annual basis for a three year period. Increases to policy benefits will be made regardless of if you are already receiving benefits. The additional benefit amounts received through this option will result in increased premiums based on your attained age and premium rate at the time of the increase.

Three Percent or Five Percent Simple Inflation Benefit Option. This option will automatically increase your facility and home care benefit by three or five percent (whichever option was selected when the policy was purchased) on the anniversary date of your policy.

Three Percent or Five Percent Compounded Inflation Benefit Option. This option will automatically increase your facility and home care benefit by three or five percent (whichever option was selected when the policy was purchased) of the prior year’s benefit amounts on the anniversary date of your policy.

Are there any premium discounts available?

Partner Discount

If both you and your spouse or partner are covered under a long term care insurance policy issued by the same long term care insurance company, both of you will receive a 30% percent discount on premium payments. If your spouse or partner is not purchasing long term care insurance coverage from the same long term care insurance company at the same time, you are eligible for a 15% discount. Persons potentially eligible under this discount include married couples, sibling, parent/child, other familial relationships, domestic partners or any two individuals of either sex who have established a serious and committed relationship, are over the age of 18, have lived together for a period of time (varies by company), are financially interdependent, and are not legally married nor a Partner to anyone else.

Long Term Care Insurance Premium Payment Options

Lifetime. Premium payments are made for the life of the policy.

10 Year Paid Up. Premium payments are accelerated so that your policy will be paid up after 10 years. This option is typically available to those ages 40 to 75. This feature is typically not available with the Guaranteed Purchase Option Rider.

Paid Up at Age 65. Premium payments are accelerated so that your policy will be paid up when you reach age 65. This option is not available to those over age 55 or with the Guaranteed Purchase Option Rider.

Premiums may be paid annually, semi-annually, quarterly or on a monthly basis. Monthly payments are made by electronic funds transfer (EFT).

*Only the lifetime payment option is available in the state of Texas

1 Genworth 2011 Cost of Care Survey. April 2011.

2 Ibid