Enrolling in long-term care insurance (LTC) involves plenty of customization since these policies are not standardized. They pay benefits when you can no longer perform certain activities of daily living (ADL) or suffer health issues. Here are details to know about long-term insurance.
While the concept of insurance for as long as you live has dissolved, you can still buy LTC policies for one to five years of benefits. Usually, the more the LTC benefits last, the more you'll pay in premiums.
LTC benefits are awarded under certain conditions, such as when you need assistance while dressing, bathing, or eating. You may also qualify for benefits if you suffer from a cognitive disorder caused by Alzheimer's disease or other health conditions.
An LTC waiting period is similar to a deductible, except it's optional and involves a certain amount of time before benefits kick in. You can avoid a waiting period or pay for the first 30, 60, or 90 days of care. Some insurers offer LTC policies with a specific dollar amount as the deductible.
This amount reflects the maximum amount the LTC policy will pay for each care day. Some insurers pay the daily benefit amount if you stay in a nursing home, but only a fraction of the amount for other types of care. They typically avoid paying the daily amount charged if it exceeds the daily benefit you’re aiming for.
Once you begin using LTC benefits, the maximum policy benefits reflect the policy’s total dollar amount. In California, LTC insurers are legally required to use a pool-of-money method to pay benefits and disclose the maximum dollar amount to be paid over the policy’s life. Your benefits may last longer if you only use a portion of the benefits daily.
Another LTC requirement in California is that agents must disclose the cost of inflation over the policy term and offer an inflation protection benefit. You may decide to pass this offer, which requires signing a rejection notice that you understand your benefits may not keep up with rising costs due to inflation. Therefore, you should determine your ability to pay for this gap between the daily benefit and the cost of future care.
Insurers must offer you at least two ways to protect the value of your investment. It can either be a built-in 5% compounded inflation protection plan or adding inflation protection periodically.
Since LTC insurance is different from regular insurance, working with a reputable agency you trust is necessary. The best insurance companies are flexible and allow you to change your policy. Your insurance provider should be easy to reach and communicates the policy. Here are essential items to look for when shopping for an LTC insurer: