A Guide to Long Term Care Insurance –
Why All Advisors Need to Understand Long Term Care Policy Provisions
Understanding Long Term care Insurance terminology is often the cause of great confusion and frustration for advisors as well as consumers.
Much of the benefits terminology was derived form the Long Term Disability Industry. Today many Long Term Care policies use simpler and more understandable concepts, but assessing the terms carefully is still important, because terms differ between contracts.
Let’s look at just a few for example:
Elimination (Deductible) Period
The elimination period is basically a deductible. It is a period of time that the policyholder is responsible for all their Long Term Care expenses before the benefits of the policy starts to pay. Typically the Elimination period options are 30, 60, 90, or 180 days. Agents (Advisors) must be able to communicate to consumers how a company defines the Elimination Period which can significantly impact the benefits that are payable at the claim time.
There are typically 2 types of Elimination Periods:
Service Day or Calendar Day
With a Service Day Elimination Period, each day the insured receives a covered service and incurs expenses where a bill is issued, counts as 1 day towards satisfying the Elimination Period. But if home care is needed only 2 or 3 times a week, satisfying a 90 Service Day Elimination Period can take the policyholder large layouts of personal money.
But a Calendar Day Elimination Period does not require that charges be incurred or that services be rendered to satisfy the Elimination Period. As long as the Long Term Care Policy benefit is triggered, and the policyholder needs assistance with at least 2 ADL’s (Activities of Daily Living) each calendar day counts towards satisfying the Elimination Period.
Also, some Long Term Care policies have an Elimination Period called a “1=7” provisions. This means, receiving 1 day of care each week will count as 7 days of care.
It is also important to know that some Long Term Care companies offer a “0” day Elimination Period for an extra premium. This means your policy will pay from day 1 of care!
Now, here is another example of important terms in contracts:
Also known as the “Maximum Benefit Period,” this represents the number of years that Long Term Care coverage is provided. This period usually range from 2 years to Unlimited Lifetime. The number of years selected is used to define the “total pool of money.” This is the amount available for covered Long Term Care services. Benefit Periods are defined in terms of a Daily Amount ranging from $100 to $500 a day, or a Monthly Benefit from $3,000 to $15,000 a month. It is essential for consumers to have a clear understanding between the two options which will impact their claims.
An example is $200 a day in benefits equals $6,000 a month.
However, if your Long Term Care policy has a Daily Benefit and you incur charges over the $200 a day allotted, this will now become an out-of-pocket expense for you. With a Daily Benefit, you cannot borrow from the $6,000 you have to use. With a monthly Benefit, you can use any amount you want on a daily basis as long as you do not use more than the monthly amount.
Still with me or are you a little confused?
In conclusions, consumers should first be educated about basic policy provisions, how they differ, and how they may impact future claims before choosing a Long Term Care policy. Consumers must choose a knowledgeable Long Term Care specialist capable of providing a clear expiation of these increasing complex and varied policy provisions. This is an essential step when purchasing Long Term Care today.
Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
“It is better to create a plan 10 years too soon than one day too late.”
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