Some Common LTC Policy Provisions

Listed here are some of the most common provisions associated with long-term care insurance. Most current LTC policies today incorporate them or options for them.

Eligibility - Eligibility refers to the youngest and oldest ages at which LTC coverage may be obtained. Most policies' minimum eligible ages are in the 50- to 60 year-old range, but some more recent policies have included a much lower minimum age limit, with several being as low as age 18. The upper age limits at which LTC policies can be purchased generally span from ages 69 to 89.

Renewability - Virtually all of the current generation of LTC policies are guaranteed renewable and thus can't be cancelled by the insurer except for nonpayment of premium. Although unable to cancel the policy, the insurer usually does, however, reserve the right to increase premiums in accordance with the policy's provisions. If premiums are increased, the increase will become effective on the policy anniversary date and will apply to the entire class of insureds, not just a single individual.

Additionally, some LTC policies are noncancellable, which means that the insured has the right to continue the coverage simply by making the premium payments in a timely manner. When this is done, the insurer has no right to make any change in policy provisions and can neither decline to renew or change the premium rate at renewal for any reason whatsoever.

Premiums - Similar to life insurance, LTC premiums are generally based on an individual's age when he or she purchases the policy. Basically, the younger the person is at the time of purchase, the lower the premium. Additionally, premiums may vary according to the elimination- and benefit periods selected – for example, the longer the elimination period, the lower the premium; conversely, the longer the benefit period, the higher the premium. Premium variations may further result from underwriting considerations, such as the risk factors associated with the applicant, including his or her current ability to perform normal functions or activities of daily living (ADLs). If the applicant needs assistance with an ADL at the time of application the premium will be higher than it would be if he or she didn't require such aid.

Elimination Period - The elimination period can actually be thought of and defined as a "time deductible." Similar to that of a disability income policy, no long-term care benefits are paid until the elimination period is satisfied. Most LTC policies provide for a period of time, usually expressed in days or months, at the beginning of a confinement episode in a long-term care facility, during which no benefits are payable. Such waiting periods are often thirty days or longer. Thus, after the insured has been confined to a nursing home for a term of thirty days (or longer, if required), LTC benefits would begin to be received. With all other factors being equal, the longer the elimination period the lower the policy's premium.

Waiver Of Premium - Nearly all LTC policies include a waiver-of-premium provision that takes effect after the insured has been confined for a specified period of time – typically ninety days, but as long as 180 days with some policies. A few have no such provision, meaning that the insured will be required to continue premium payments no matter how long he or she is receiving care. When the waiver is applicable, premium payments generally resume when the care ceases.

Benefit Amount - The applicant may be offered a choice of either the maximum daily benefit amount for a nursing home stay or covered home health care. Again, higher daily benefit amounts translate to higher policy premiums.

Most LTC policies provide a specified daily benefit during confinement. Traditionally, this benefit has been provided as a maximum daily amount (in other words, reimbursement for charges up to the stated limit, but at a rate of no more than the daily limit). Benefit amounts typically range from $50 up to several hundred dollars per day. However, some insurers provide coverage on an "expense-incurred" basis – which is full reimbursement for the actual charges incurred. The maximum policy benefit can be calculated by multiplying the full daily benefit by the total number of days in the benefit period.

As an example, let's say that Jim has a long-term care policy with a 30-day elimination period, a daily benefit of $85 per day and a two-year maximum benefit period. His maximum policy benefit would therefore be $62,050 ($85 per day multiplied by 730 days). If Jim were confined to a nursing home for a total of six months, his benefit amount would be calculated as follows: for the first thirty days no benefit would be paid while the elimination period was being satisfied; for the next six months he would receive $85 per day; and his total benefit would be $15,300 ($85 x 180 days). If Jim's actual incurred charges were more than $85 a day, he would be responsible for paying the additional amount.

Most policies specify the dollar amount per day that will be paid for skilled nursing care. Some may also include sub-limits for special types of care or services. For instance, the benefit for home health care or adult day care is usually a fixed percentage of the specified daily benefit, typically 50%. In addition, the policy may also include a deductible amount that must be satisfied before benefit payments begin.

Benefit Periods - The maximum period for which benefits are paid by long-term care policies can vary, typically from three to five years. Some policies, however, offer unlimited benefit periods. Others may contain both a maximum benefit period per confinement along with a lifetime maximum benefit period. The benefit period can also end when a specified maximum payout amount has been reached.

Care Level - Care level determines whether a policy will pay only if skilled nursing, intermediate, or custodial care – as specified in the policy – is required at the time the individual enters the nursing home. This is extremely important, since some policies pay only if intermediate or skilled care is involved, thereby excluding custodial care – which happens to be the most common type of care required by elders. Better LTC policies will pay benefits regardless of the level of care required.

Hospice Care - This care is commonly offered as an optional benefit under LTC policies. The primary focus of hospice care is pain control, comfort and counseling for terminally ill patients and their families. A hospice is simply a facility whose purpose is to help terminally ill patients die with dignity and with as little suffering as possible. Typically, the expenses incurred from a hospice are room and board and medication for the alleviation of pain.

Respite Care - Respite care is normally associated with hospice care. With this benefit, the patient is admitted to a nursing home for needed care for a short period of time, or the policy will cover the cost of replacing for a short period (a day or weekend, for example) the primary care giver – usually a family member – who's looking after an elderly person in the home.

Home Health Care - The majority of current LTC policies cover home health care as an alternative to nursing home care. Home health care is provided in the insured's home and must begin within a specified period of time following a nursing home stay. The home health care benefit is typically 50- to 60% of the regular daily nursing home benefit. Home health care is an extension of intermediate custodial care; in other words, the patient requires some health care, but is able for the most part to function without the need for confinement in a nursing home. This type of health care might include physical therapy and some custodial care, such as meal preparations.

Adult Day Care - Many of today's long-term care policies also provide for adult day care to allow the primary care giver to continue working at his or her regular job. Either provided in the insured's home or at a day care facility, adult day care is basically social and health care services for functionally impaired adults. Typically included are transportation to and from the day care center along with a variety of health, social and other related activities. This care usually also includes meals and certain medical services. Specialized care for Alzheimer's victims is generally also included in adult day care benefits.

Exclusions - A major advancement of current LTC policies is that most now cover Alzheimer's disease and other organic-based mental illnesses, which formerly were often excluded. Every insurance policy, however, has some exclusions. Each should therefore be studied carefully to determine what's covered and what is not. Typical LTC exclusions are wars and acts of war, alcohol or drug dependency, self-inflicted injuries, mental illness and nervous disorders with no verifiable organic cause, and treatment provided without cost to the insured (such as that received at a veteran's hospital).

Pre-existing Conditions - Most LTC policies don't cover conditions that existed during a specified period of time immediately before the policy effective date (usually six months). A few policies, however, do not have this exclusion.

Professional Care Advisor - Coverage may be provided for the services of a care coordinator to help design the most appropriate plan of treatment for the insured.

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