by | July 19th, 2017

The idea of a serious illness late in your life is not a pleasant one, but it’s wise to protect yourself and your family from the financial hardships associated with long term care (LTC).  One way to protect yourself is by purchasing a long-term care insurance policy.

Not all long-term care insurance products are created equal; some are more favorable than others.  Here are some important factors to consider:

What type of LTC policy are you purchasing?

  • Traditional LTC policy: This will cover the need for long-term care benefits only. You pay an annual premium for the policy and if you need long-term care, the policy pays out the benefit to you over time. Some people are wary of this option because if they die without needing long-term care, they may feel they’ve “wasted” the premium.
  • Hybrid Life/LTC policy: This hybrid type of plan is becoming an increasingly popular choice among our clients. As difficult as it is to think about, they feel secure in knowing that eventually the policy will provide benefits, either due to the need for long-term care or upon death.  If you qualify for the long-term care benefits, you will have “early” access to the death benefit for long-term care needs (return on investment).  This is usually a set amount per month (between 2% and 4%).
    • For example, a $500,000 death benefit with a 3% long-term care rider will provide a benefit of $5,000 per month if you need long-term care. This also means that receiving these LTC benefits before your death, the death benefit of the policy will decrease by the same $5,000 amount.

How do I qualify for LTC benefits?

  • In order to qualify for LTC benefits, according to federal law, you must need assistance with 2 out of 6 Activities of Daily Living, or ADLs. These six activities are:
    • Transferring (For example: getting up from a chair independently, to walk to another location in your home.)
    • Continence
    • Dressing
    • Toileting
    • Bathing
    • Eating
  • Or you require substantial supervision due to severe cognitive impairment, such as with dementia or Alzheimer’s.

How will benefits pay out, once I file a claim? Reimbursement vs. Indemnity/Per Diem

  • Reimbursement policies will repay you for credible expenses that you incurred that are very specifically related to your long-term care policy. Typically, you need to show receipts to the insurance carrier for your expenses and then will be reimbursed.
  • For example, if a loved one gets a certain number of hours of weekly home health care (let’s say 25 hours per week), your insurance carrier will only reimburse you for the exact hours charged for that home health care each week; the expenses are limited to what is specifically allowed in your policy. If house cleaning wasn’t in the policy, then you won’t get reimbursed for it.
  • Indemnity or “per diem”-based policies will pay the full monthly benefit of the policy directly to the policy holder without regard to the actual expenses you have incurred. There is no need to submit receipts or deal with cumbersome monthly forms.
  • So, for that example above about home health care, by choosing an indemnity policy, you’ll receive your full monthly benefit that can be used to pay for those services, and if you choose, you can also use those funds to have your house cleaned, too! There is more financial flexibility with this option.

If you or someone you know is interested in learning more about long-term care insurance plans, please let us know.  We can help you structure the right type of plan that will best fit your needs and budget.