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Individual Policies
With an individual policy you have a contract between you and the
insurance company. You receive a copy of the policy that is your
contract with the insurance company. The company is not allowed
to make any changes to the contract without your permission. The
insurance company has the right to increase your premiums on a class
basis. That means they can't increase it on you alone, but have
to do so on the entire class.
There are different types of policies available depending on the
state you live in. The most common policies are Nursing Home Only,
Home Care Only and Comprehensive Policies. The Comprehensive policies
are the most popular policies because they cover all types of long-term
care. for
information on the policies we have available.
Group Policies
With a group insurance policy you are not the policyholder. The
contract is between the entity that set the plan up and the insurance
company. This could be your employer, an association or maybe a
consumer group. The insurance company and the policyholder can cancel
the policy, or alter it without your permission. Usually there is
little flexibility in the benefits provided. Sometimes the group
plans are designed without inflation protection, limited benefit
periods, and long elimination periods. Unfortunately, people mistakenly
assume that because the group insurance premiums are cheaper they
are a better buy. In many cases an individual policy can be a better
buy for you and NOT necessarily more expensive.
Endorsed Group Policies
These policies are essentially an Individual policy offered through
an endorsing group or organization. The organization researches
a variety of companies and comes up with the one that they feel
should be offered to their members, thus they are endorsing a particular
plan. With this type of plan the policy follows the guidelines listed
above for Individual Policies. An example of this type of plan is
for members of The Retired Officer’s Association (TROA). Members
of this organization who are interested in long term care insurance
are referred to the endorsed plan by General Electric Capital Assurance.
Then the individual and representatives of the company get together
to design benefits.
Nursing Home Daily Benefit
The most common daily benefits on the market range between $50-$250
per day. We can provide information to you on the
so that you can choose the correct daily benefit.
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Tip: Some people choose to co-insure the cost of long-term
care rather than insuring for the full amount. For example:
if they know that nursing homes are running about $140 in
their area they may choose to only purchase $110 to $120 daily
benefit. This helps keep the premiums affordable.
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Home Care Daily Benefit
With most policies the home care daily benefit is determined by
the percentage of the nursing home daily benefit you choose. For
example, the most common choices are 50% and 100%. If you purchased
$140 as your daily benefit and 50% as your home care option you
could receive $140 a day for nursing home care and $70 per day for
home care.
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Tip: If home care is important to you, we highly recommend
choosing the 100% home care option. If you are single you
need to be realistic as to how likely it is that you could
remain at home. It may be wiser to put your premium into purchasing
richer benefits in a Nursing Home Only policy that covers
assisted living.
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Benefit Period
This is the length of time that your policy will pay you benefits.
The most common range of benefits available today are anywhere from
2 years to unlimited benefits. Some policies pay benefits on a reimbursement
model and others pay on an indemnity model.
The most common is the reimbursement model. Here is
how it works: the benefit period and daily benefit are multiplied.
This is called a "pool of money" and gives you a single
lifetime maximum number of dollars, rather than days. For example
if you purchased $100 per day and a three year plan (1,095 days)
your "pool of money" would be $109,500. ($100 x 1,095=
$109,500). $109,500 would be your single lifetime maximum and those
dollars would be available until you used them all. Therefore, a
three year plan could actually last longer if you did not use the
full $100 per day.
An indemnity plan on the other hand does not have
a "pool of money" because when you need long-term care,
the policy pays the entire daily or weekly amount versus only reimbursing
you for your expenses.
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Tip: We have listed some of the statistics on the average
length of time people need long-term care in our LTC Overview.
However, what if you are not the "average"? We recommend
purchasing as long of a benefit period as you can comfortably
afford.
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Inflation Protection
LTC Insurance is something that you purchase with the thought that
you will use it in the future. In the future the costs of long-term
care will be greater than they are now. The increase in nursing
home care costs (and other types of long-term care) historically
has surpassed the increase in the Consumer Price Index. That is
why it is imperative that you purchase an inflation protection option
with your policy. With this option, your daily benefit will grow
every year so that when you need to access your benefits they will
have kept up with the cost of long-term care. There are several
options available. The most common are an annual increase of 5%
simple or 5% compound. Several policies allow you to increase your
daily benefit amount every three to four years by purchasing additional
coverage at your current age without proving insurability. Please
contact us and we can advise you on which option would be the best
for you.
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Tip: Please note that with the 5% simple and 5% compound
options the increase is applied to your benefits, NOT your
premium. The cost for the inflation benefit is already built
into the premium you are paying.
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Elimination Period / Waiting
Period
With your other types of insurance you have deductibles that you
are responsible for before your policy will pay. LTC Insurance works
the same way but the deductible is known as an elimination or a
waiting period. This is the time period after the onset of a loss,
such as entering a nursing home or needing home care, during which
benefits are not paid. After you meet your elimination period, your
policy will begin paying benefits. Some common elimination periods
are 20, 30, 60, 90, and 100 days. Generally speaking, the longer
the elimination period, the lower the premium, all other considerations
being equal.
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Tip: You might want to look at the shorter elimination periods
as the difference in premium is not significant, but in the
future the difference of your out-of-pocket cost when you
pay the deductible will be!
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Benefit Triggers
Before your LTC policy pays benefits you have to qualify for a benefit
trigger. The benefit triggers vary between tax-qualified and non-tax
qualified policies, and also vary between companies.
Tax-Qualified Benefit Triggers
The benefit triggers in tax-qualified policies are required to meet
criteria mandated by the Health Insurance Portability and Accountability
Act. As part of the benefit trigger, all tax-qualified policies
require a certification from a medical practitioner that your care
is expected to last at least 90 days. In addition to this you must
also need help with either of the two benefit triggers listed below:
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You need help with at least two of at least 5, (most companies
have 6), of the activities of daily living: bathing, dressing,
continence, eating, toileting, and transferring.
OR
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You need supervision due to a severe cognitive impairment (to
the point that you are a threat to yourself or others).
Non-Qualified Benefit Triggers
Not all carriers offer non-tax qualified policies. Non-tax qualified
policies do not require a 90 day certification. These policies vary
greatly amongst carriers. Some of the non-tax qualified policies
also have medical necessity as a trigger.
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Tip: Do not make a decision on which policy to purchase based
on the benefit triggers alone! There are other major differences
between tax-qualified and non-tax qualified policies! Contact
us for additional information on the differences!
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Discounts
Most LTC companies offer spousal discounts anywhere from 10-25%.
Some policies will offer these discounts even if one spouse is declined,
to domestic partners, and even siblings living together.
LTC companies also offer preferred discounts between
10-20%. Each company has different criteria that you must meet to
qualify.
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Tip: In order to take advantage of the preferred discounts
it is better to apply when you are younger. You are more likely
to get the preferred discount and then in the future if your
health condition changes you will get to keep the preferred
discount! This will result in a considerable savings to you.
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Premium Payment Options
You can pay your premiums annually, quarterly, semi-annually and
monthly. Some people pay for their premiums out of their monthly
income. Some people don't have much discretionary monthly income
so they pay for their premiums by using interest off of their savings
accounts. Contact us for recommendations and additional information
on the features of LTC Insurance.
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Tip: Try to pay your premiums annually as you will save money.
If you pay anything less than annual there is usually an additional
service charge.
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Who Should Not Purchase LTC
Insurance?
LTC Insurance is not appropriate for everybody. Experts recommend
that you should only consider LTC Insurance if your assets, excluding
your home and car (if you are married), are more than $50,000 and
if your annual income is more than $25,000. If your assets and income
are less than that you are probably eligible (or close to being
eligible) for Medicaid. However, keep in mind that in most states
Medicaid will not pay for home care. That is why even though some
people are eligible for Medicaid they still purchase LTC Insurance.
Many times children will pitch in and pay the premiums for mom and
dad to ensure that they will get quality care and not have to rely
on Medicaid.
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