How Long-Term Care Insurance Works

POLICIES IN CALIFORNIA MAY BE ONE OF THREE TYPES:

• “COMPREHENSIVE” , covering in-home, adult day-care, residential, assisted living, or nursing home care
  
• “FACILITY - ONLY”, covering Skilled Nursing and Residential Facility (“assisted living”) only
  
• “HOME CARE ONLY”, limited to home and often adult day-care only

Daily (or Monthly) Benefit: The basic building block. Upon application, you select a daily amount that will be paid on your behalf. Common choices in California range from $110 – 200. The amount you choose should reflect care costs in the area you expect to live/retire.

Policy Maximum: How many years will the policy pay the daily benefit? While most people prefer unlimited plans, many select 3 to 5 year plans due to budget concerns. Options offered may include 1, 2, 3, 4, 5, 6, 7, and 10 years, and Unlimited. Some policies include a Restoration feature - - original benefits restored after claim (and illness) free for 180 days.

Elimination (“deductible”) Period: The number of days that you pay care costs prior to receiving policy benefits. Common choices are 30, 90, and 180 days. Some carriers offer 60, 730, and even 365 days. Look for policies that offer “Calendar Day” calculation of days applicable to the elimination period, rather than “Service Day”. (“Service Day = a day on which paid care was received). Some policies WAIVE the elimination period for home care.

Inflation Protection: increases the daily benefit to keep pace with inflating care costs. Most carrier offer either a “compound 5% interest” or “simple 5% interest” increase. Compound is extremely important for younger purchasers, up to about age 68. America’s leading consumer periodical has measured the rate of inflation in care costs at 9.7%.

Common options: Return of Premium (to survivors), Benefits restoration (see above under Daily Benefits); “Shared Care” for spouses, deep discounts for spouses or live-in partners (vary dramatically by carrier), Monthly aggregate benefit payments. Make sure you understand the pros and cons of any “optional” coverage suggested by your agent.

Tax Issues: Most carriers now offer only the “Tax Qualified” policy (partially or fully deductible depending on taxpayer / business status; benefits not included in gross income). A few still offer the older “Non-Tax-Qualified” policies. The NTQ policy is easier to trigger, but has no tax advantages. Benefits in either policy are triggered when one is unable to perform basic activities of daily living (ADL-s), or is cognitively impaired.

California Partnership Policies: A small number of insurers working with the CA Dept. of Health Services offer a unique “Medi-Cal Asset Disregard” that may protect some assets even if the policy is exhausted. Make sure your Agent has received the State Partnership training, so that he may discuss these important policies with you.

AMERICA’S LEADING CONSUMER MAGAZINE RECOMMENDS a comprehensive policy, if affordable, that will pay for at least 4 years worth of care in facilities you might use, with the lowest possible elimination period, and including compound 5% inflation protection..

ASSET – BASED LONG TERM CARE INSURANCE

Several strategies exist to fund policies by shifting or re-allocating existing investment or other liquid assets, rather than tapping disposable income.

PLEASE DON’T FORGET:

• BASED ON YOUR HEALTH, ANY INSURANCE COMPANY CAN LIMIT YOUR COVERAGE, CHARGE HIGHER PREMIUMS, OR EVEN DENY YOUR APPLICATION, SO APPLY WHILE HEALTHY.
  
• WHILE RATES DON’T GO UP WITH AGE ONCE YOU PURCHASE LTC INSURANCE, YOUR RATES WILL BE HIGHER THE OLDER YOU ARE WHEN YOU APPLY, SO TRY TO APPLY WHILE YOUNG.