Select and Purchase Benefits
Your selection of LTC insurance benefits should be a part of a detailed longterm
care plan. The amount of the daily (or weekly or monthly) benefit you
select should consider what services the policy does or doesn’t cover and
where you receive those services. Your choice should also factor in other
resources you will (or won’t) have. See Strategy #63 for more information.
Understand benefit payment
Know how much of your daily benefit will be paid. Here are some common
options:
- Payment of the full benefit regardless of the actual expenses incurred:
Newer policies may offer this as a rider that increases your premium.
The trade-off is less use of your resources in the future.
- Payment of actual expenses up to the amount of the benefit: If actual
expenses are less, the difference stays in the policy and may increase
the amount of time over which benefits will be paid.
- Payment of the going rate for the service being billed: Find out how
the going rate is determined. Is it the rate for the same service within the
same care facility? Within the town, city, state, or region? The danger is
a benefit less than the actual expense incurred.
The length of time you choose to receive benefits is important. Most policies
offer benefit periods ranging from just one year up to as long as lifetime. The
longer the time period, the larger the premium. However, the premium difference
for a ten-year policy versus a lifetime policy is usually fairly small.
Some policies may divide the benefits period into a specified number of years
of care at home and a specified number of years in a facility. You have more
flexibility with a benefit period that covers unlimited care in all places.
Another important benefit is the waiting period. After you need care, this is
how many days you wait before expenses are covered by your benefits. It’s
similar to a deductible on other types of insurance. Waiting periods can run
from 0 to 365 days or longer. The longer the period, the lower your premium.
The higher inflation rate for long-term care may make a shorter waiting
period a wise choice.
To make a more-informed decision, compare extra premium payments over
the number of years until you may need long-term care to the cost of 30 or 60
days of care today inflated over the same time period.
Maintain flexibility
For maximum flexibility and control, be sure the benefit amount is the same
whether you receive care at home, in an assisted-living residence, or in a
skilled-nursing residence. Some policies offer a 100-percent benefit for care
in a skilled-nursing home and a reduced amount for care in your home. This
factor may force a move to a care facility sooner than necessary.
Some policies have separate waiting periods for care at home, in an assistedliving
residence, and at a skilled nursing residence. Be sure you have to meet the
waiting period only once during your lifetime. This applies to situations when
you may receive care for a while and then not need care for a period of time.
Consider Inflation Protection
Long-term care insurance is something you may not use for many years, so
consider inflation protection. Policies generally include this as a rider for an
additional premium. Common benefits include the following:
- Simple inflation protection: Your daily benefit and total benefit
amounts increase each year by a percentage that’s applied to the original
amount.
- Compound inflation protection: Your benefit increases by a percentage
each year that’s applied to the amount of the past year’s benefit. That
means benefits will rise higher than with single inflation protection.
- Additional purchase inflation protection: You have an option to purchase
additional benefit increments periodically at prevailing rates for
your age. Be sure you understand all conditions related to accepting or
not accepting the increase in benefit.
