Tag Archives: Adult Day Care

Exploring the Lesser Known Features of Long-Term Care Insurance

Exploring the Lesser Known Features of Long-Term Care Insurance

Buyers of long-term care insurance often focus on just the coverage basics, such as the level of daily benefits, length of coverage, and under what conditions the policy will pay a claim. While these basics form the chassis of the policy, long-term care policies offer a host of other options that may prove beneficial to the policyholder.

Let’s take a look at some of these available options:

Survivorship Premium Waiver– If both spouses obtain long-term care policies from one insurer, some policies will provide a waiver of all remaining premiums if one spouse dies within a certain number of years after the policy is issued. For example, the policy may provide a premium waiver if the policies have been in effect for 10 years before one spouse passes away. The policy might also stipulate that no claims could have been paid during the period.

This feature may be included with the policy automatically or it may be offered as a rider to the base policy for an extra premium.

Shared Pool of Benefits- Instead of each spouse having an individual policy with separate benefits, they can elect to share each other’s benefits if needed. For example, each spouse might have a policy with a 3-year benefit period. Once one spouse has expired 3 years of benefits they have no further coverage, but the other spouse may still have 3 years of coverage remaining. With the shared pool of benefits rider, the spouse receiving care could also access the other spouse’s benefits.

This feature is most commonly offered as rider to the base policy for an extra premium.

Alternate Plan of Care– With our population continuing to age, new ways of delivering long-term care will continue to be developed. Not too long ago, no one had ever heard of adult day care or assisted living facilities.

With the alternate plan of care feature, you can ensure that your policy will never grow obsolete. You, your physician, and the insurance company will develop a plan of care which best serves your needs based on currently available options.

Look for this feature to be included in the policy with no additional cost.

Accelerated Premium Payment Options– Many insureds worry about their ability to afford premium payments during retirement when their income is reduced. Some insurers offer policyholders an option to pay accelerated premiums for a shorter period of time with the benefit of a contractually paid up policy after a certain period. For example, a 10- or 20-year accelerated payment period with no further premiums due afterwards.

This option has several benefits. Business owners may be able to deduct premiums from their taxes during their working years with no further premiums due in retirement. Additionally, with the cost of long-term care increasing rapidly, a contractually paid up policy means no exposure to premium adjustments made by insurers in future years to account for higher than expected claims experience.

Enhanced Elimination Periods– While all policies provide several elimination period options ranging from a 0 day to a 180 day elimination, it’s important to understand how the elimination period can be satisfied.

For example, some policies may credit a week towards your elimination period with just one day of home care received per week. Still another policy may have no elimination period for home care benefits while nursing home or assisted living facility care may require an elimination period.

These are just a few of the lesser-known features of long-term care insurance. There are many other options to consider when selecting a policy, but be sure to compare not only the basics of each policy but the included features and available riders.

Top Five Long-Term Care Insurance Myths

Top Five Long-Term Care Insurance Myths

If you’ve decided to purchase long-term care insurance (LTCI), good for you. There’s no question that LTCI can help protect your family’s finances by covering the exorbitant costs of long-term care if and when necessary.

However, because LTCI is such an important and sometimes costly purchase, it’s vital that you do your research and buy a policy for the right reasons. Too many insurance companies persuade consumers to buy LTCI with exaggerated claims and unproven “facts.”

Don’t fall prey to these fallacies. When purchasing an LTCI policy, keep your eye out for these top five sales pitches:

  1. An LTCI policy is a valuable tax write-off.

This may be true in some cases, particularly for business owners, but this statement is a myth for many LTCI policy owners. Although premiums paid for a tax-qualified LTCI policy can ultimately reduce your tax bill, you have to itemize deductions to qualify.

Additionally, for tax write-off purposes, LTCI premiums fall into the medical and dental expenses categories. This category is limited to expenses that surpass 7.5% of your income. So, if you’re income is $75,000, you’ll need more than $5,625 in unreimbursed health and dental care expenses before you can even add in your LTCI premiums.

Plus, even if your LTCI premiums go above 7.5% of your income, you can’t include all of the payments in your medical and dental expenses deduction. Your premiums are deductible according to a sliding scale based on your age. Therefore, LTCI may not be such a great tax write-off after all—depending on your situation, it may not save you a single dime in taxes.

  1. Assisted-living facilities are all created equal.

This is definitely not true. Under current law, there is not a national standard definition for “long-term care facility.” Therefore, if your LTCI policy says it covers a stay in an “assisted-living facility” or “adult day-care facility,” this could mean something different depending on the particular policy and the state where the policy was created.

Therefore, if you purchase an LTCI policy and then move to another state, there’s a possibility that there are no facilities in your new state that match the definitions of your policy. Obviously, this could put you and your family in a serious bind if you ever require long-term care. Before you sign on the dotted line, ask plenty of questions and make sure you fully understand what type of facilities the policy covers.

  1. Buy now to lock in the price.

When purchasing an LTCI policy, many consumers are under the false impression that their premiums will be the same forever. Although your premiums typically depend on your age at the time you purchase the policy, this does not mean the premiums will stay the same for the life of the policy. Your premiums can go up any time your insurance company enacts a rate increase, as long as the increase is approved by the state insurance commissioner.

Additionally, LTCI is particularly vulnerable to rate increases because it’s relatively new to the insurance world. Insurance companies don’t have a sufficient amount of data to predict the number of long-term care claims they will face in coming years.

  1. You should replace your current LTCI policy with a newer one.

If an insurance agent pushes you to get rid of your current policy for a new one and he doesn’t explain the benefits of the switch, this should sound off alarm bells. More than likely, the agent is just looking to boost his commissions.

Although some LTCI policies may have an added benefit that your current policy doesn’t include, it’s typically not a wise move to switch policies in mid-game. First of all, your premiums are based on your age at the time you purchase the LTCI policy. Therefore, if you switch you to a new policy, your premiums will increase. On top of that, you may have developed a pre-existing condition since you purchased the first policy, and this may not be covered by the new policy.

If you want to add benefits to your policy, you’re probably better off to upgrade your current policy instead of buying a new one.

  1. An insurance company’s financial rating isn’t important.

If an insurance agent tells you a carrier’s rating isn’t important, run as fast as you can and don’t look back. You wouldn’t eat at a restaurant with an “F” health inspection grade, would you? For the same reasons, you shouldn’t do business with an insurance company that has low marks.

Before you buy an LTCI policy, check the company’s financial rating with Standard & Poor’s, Moody’s, A.M. Best, Fitch or Weiss—these are all reputable financial rating services. You may also want to contact your state’s insurance department for additional details on specific companies.

Long Term Care Terms

Long Term Care Terms

You will find definitions of terms commonly used terms in Long-Term Care Policy

Activities of Daily Living
The following functions for personal independence in every day living and are used as the measurement standard to determine your functioning capacity. These ADLs are a national standard for tax-qualified long-term care plans.

These are the Activities of Daily Living:

  • Bathing: Your ability to wash yourself, including a sponge bath, or in a tub or shower, including the task of getting into and out of the tub or shower.
  • Continence: Your ability to control bowel and bladder function; or when unable to maintain control of bowel and bladder function, your ability to perform associated personal hygiene (including caring for catheter or colostomy bag).
  • Dressing: Your ability to put on and take off all items of clothing and any necessary braces or artificial limbs usually worn, and to fasten and unfasten them.
  • Eating: Your ability to feed yourself by getting food into your body from a receptacle (such as a plate, cup or table) or by a feeding tube intravenously.
  • Toileting: Your ability to go to and from the toilet and maintain a reasonable level of personal hygiene. This includes getting on and off the toilet and caring for clothing.
  • Transferring: Your ability to move in and out of a bed, chair or wheelchair.

The certification by a licensed health care practitioner must be made at least annually.

Adult Day Care
A program for six or more individuals of social and health-related services provided during the day in a community group setting for the purpose of supporting frail, impaired, elderly or other adults with a disability who can benefit from care in a group setting outside the home.

Cost of Waiting
Definition: The total cost of premiums paid at one age versus the cost of premiums paid if purchased at a later age.

Cognitive Impairment*
A deficiency in a person’s short or long-term memory, orientation as to person, place and time, deductive or abstract reasoning, or judgment as it relates to safety awareness.
*see Severe Cognitive Impairment

Custodial Care
Care given primarily for the purpose of assisting another with Activities of Daily Living (ADLs).  Custodial Care is not intended to restore health or the ability to function. It can be provided by a non-medically trained professional.

Daily Benefit Amount
The maximum amount of money you will be reimbursed for services during each day you are eligible for qualified long-term care benefits.

Elimination Period

The number of days (waiting period) before LTC will pay covered benefits under your policy. You need only satisfy this elimination period once in your lifetime.

Standard elimination period options are 30, 60 and 90 days. These days need not be consecutive and may be accumulated until your elimination period has been met.

Home Care
Care provided to a person in his or her home primarily to assist with Activities of Daily Living (ADLs).

Home Health Care
A program of professional, paraprofessional or skilled care provided through a home health care agency to an insured in his or her home.

Inflation Protection
If you choose to add Inflation Protection to your contract, you can increase your Maximum
Monthly Benefit to protect against the anticipated increases in the cost of
long term care.

With these riders, you can add a contract feature that returns at least part of the premiums you paid if you cancel your contract or let it lapse:

  • Contingent Nonforfeiture (included in base) or
  • Shortened Benefit Period Continued coverage equal to premiums you have paid if your contract has been in force for three years and lapses.
  • Full Return of Premium* If you die while the contract is in force, we will refund all premiums you have paid for the contract and riders. Available only to enrollees age 65 and under.
  • Return of Premium*  The same protection as Full Return of Premium except any benefits paid or payable are deducted. Available only to enrollees age 75 and under.

Respite Care

Temporary relief from caregiving duties from a member of the immediate family or other person who is the unpaid primary caregiver. This “time off” helps the primary caregiver maintain his or her health and mental well-being.

Restoration of Benefits
Whenever a period of 180 days elapses in which you were not chronically ill, we will restore your Lifetime Maximum to what it would have been had no benefits been paid under your contract. Not available with Unlimited Lifetime Maximum. Not available in conjunction with the Shared Care Rider.

Severe Cognitive Impairment
The deterioration or loss in intellectual capacity that requires Substantial Supervision to assure the insured’s and others’ safety. The deterioration or loss is established by clinical evidence and standardized tests that reliably measure:

  • Short-term or long-term memory
  • Orientation as to people, place, or time
  • Deductive or abstract reasoning; and judgment as it relates to safety awareness.

Skilled Nursing
A level of care that is provided by a registered nurse and is prescribed by a doctor for the medical care of the individual.

Spending Down
Spending down is when you, or your family, spend all your assets to reach the level where Medicaid will cover your LTC expenses. Not only will this action deeply effect your surviving spouse, but it can also take away your freedom of choice. Most facilities have a limited number of Medicaid beds, if they accept Medicaid at all. Medicaid has a significant number of restrictions on Home and Facility care, approved caregivers and the location of that care.