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.
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