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What Are The Components Of A Long-Term Care Insurance Policy?

As with many insurance industries, Long-Term Care Insurance has a lot of jargon. Industry terminology can make coverage decisions incredibly difficult. This FAQ article breaks down the major components of Long-Term Care Insurance.

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Long-Term Care Insurance can seem complex and sometimes downright frustrating. Today we want to help you feel less frustrated with Long-Term Care Insurance by explaining how policies work.

LTC News consults with Long-Term Care Insurance experts. Our goal is to make LTC Insurance information more accessible. We want you to feel prepared to make the best decisions for your long-term care needs.

We created this FAQ article to help you better understand each part of Long-Term Care Insurance. 

This article will be broken into two parts:

  1. The components of a Long-Term Care Insurance policy and how they affect coverage
  2. Additional features available within your policy

Components of a Long-Term Care Insurance Policy

Long-Term Care Insurance offers comprehensive coverage for long-term health care. Comprehensive coverage means that a policy will cover all aspects of long-term health care as soon as you need it. 

For more information about comprehensive policies, read our FAQ about what Long-Term Care Insurance is and what it covers

Every Long-Term Care Insurance policy includes several features and benefits. These will help you and your family when you need long-term health care. 

You can access your benefits through claims. Features and benefits may look different for everyone – it all depends on what type of coverage you want.

There are also many lesser-known features of Long-Term Care Insurance policies. These can be very beneficial to you and your family. We’ll discuss these features, as well as benefits and claims, below. 

Benefits

Benefits are the dollar amount your policy will pay towards long-term health care. As a policyholder, you must choose the amount of benefits within your policy. 

There are several terms associated with benefits. We’ll break these down below. 

Benefit Account

Benefit accounts are the initial amount of money within a policy on day one, before any inflation benefits. Benefit accounts have a few different interchangeable names. These include a pool of money, initial benefits, and maximum lifetime benefits. 

The benefit account acts like a bank account. It displays the total amount of money available in a policy at any given time. These benefits grow with inflation and diminish as the policy pays out benefits. 

Benefit Limit

The benefit limit is how much a policy can pay out on a daily or monthly basis. These are called daily or monthly benefit limits.

Long-Term Care Insurance policies will pay out as many benefits as the limit allows. You're responsible for any long-term health care expenses that exceed the daily or monthly benefit limit.

Policies pay out benefits based on your expenses during the daily or monthly limit. If you don't use the maximum amount available during the daily or monthly limit, the money stays in your benefit account for future use. 

Cash Benefits

Some policies offer cash benefits instead of regular benefits. Cash benefits are paid directly to the policyholder in cash. With cash benefits, the policyholder will receive the total amount of each day or month at the time of claim–no matter the cost of care.

For example, let’s say your cash benefit limit was $100 a day. You would receive that money in cash each day your claim is active. You’d still receive $100 even if your cost of care that day was $50. 

Benefit Period

Benefit periods are the minimum time individuals have Long-Term Care Insurance benefits. The benefit period and coverage do not end until all the money within a policy has been used.

A benefit period is just a term used to help visualize coverage. It is not representative of the actual policy length. In other words, policies do not have time limits, per se. 

Keep in mind that not all companies use the term "benefit period." Some companies let policyholders select a total amount of money in their policy on day one. 

Regardless of the terminology used, benefit periods do not represent time. Benefit periods represent the money available to pay for care and services. 

Unlimited Benefits

Some policies offer unlimited benefits, also known as “lifetime benefits.” Those with unlimited benefits do not have a benefit period because benefits will last for life. In this case, policyholders can never exhaust their benefits no matter how long they need care.

Benefit Triggers

Benefit triggers are a prerequisite to filing a claim and receiving benefits. Think of benefit triggers as an eligibility requirement. We'll explain more about claims in the next section.

There are two ways an individual can trigger benefits. Individuals can file a claim if they feel they've met either or both of these:

  • They need help with two or more activities of daily living (hands-on or stand-by assistance).
  • They need supervision for cognitive decline, dementia, disability, or impairment. (Usually to protect or keep individuals safe).

To trigger benefits, a health care professional must confirm that the individual needs care expected to last longer than 90 days. Once the need for care has been confirmed, individuals can qualify for benefits. 

In other words, when you meet a benefit trigger, you can begin the claim process. All tax-qualified Long-Term Care Insurance policies have the same benefit triggers.

Claims

Policyholders receive their Long-Term Care Insurance benefits by filing claims. When you file a claim, you ask your insurance provider to cover care costs. 

The claim process is similar but can vary for each company. Generally, the claim process looks like this:

The policyholder (or someone representing the policyholder) gets a claims form from the insurance company. Some care providers will help with this process. 

Once you've submitted the claims form, your company should let you know if you've been approved to receive benefits. Sometimes your company will request medical records or, in some cases, an assessment from a nurse before they approve you. 

If you meet the company's requirements, you should be approved. If you don't, the insurance company will contact you and explain why you weren't approved to receive benefits. 

Once approved, your policy will either pay out benefits to care providers or to you directly. If your insurance company pays you directly, you may have to submit an invoice to receive reimbursement.

Your insurance company will review your claim periodically to make sure you still qualify for benefits.

It can be quite confusing to file a claim alone. Long-Term Care Insurance specialists have years of experience filing claims with various insurance providers. 

Many home health agencies and long-term care facilities can also help you through the process. There are many resources to help you file a claim, such as LTC News's free, no-obligation claim help page.

Elimination Periods

An elimination period is a waiting period before policyholders can receive benefits for their claims. Elimination periods only occur the first time policyholders file a claim. 

The elimination period is once per lifetime, not once per occasion. Once an elimination period is met, policyholders never have to wait to receive benefits again. 

Think of this as a deductible based on a number of days instead of a set dollar amount. If your elimination period is 90 days, and you receive care on day 87, you still have 3 days before your policy pays out benefits. During the elimination period, you’re responsible for covering all care costs. 

Elimination periods can range from zero to over 365 days. The longer the elimination period, the less expensive the policy. Policies with zero-day elimination periods are the most expensive. However, elimination periods longer than 90 days usually won't save you enough money to make up for the out-of-pocket costs of long-term care during that time. 

Most policies use calendar days to count down the waiting period. However, some policies use service days. A service day is a day that an individual receives long-term health care services. 

In most cases, the elimination period must be met before the policy starts paying out benefits. Some policies may offer partial benefits before the elimination period is met. A Long-Term Care Insurance specialist can help you determine if your policy has this feature. 

Receiving Benefits

After the elimination period ends, you'll receive Long-Term Care Insurance benefits. 

During this time, policies cover all long-term care expenses as long as care costs don't exceed the monthly or daily benefit limit. You're responsible for any amount over the daily or monthly benefit limit. 

Your coverage will continue until you no longer need care or the money in your account runs out. You do not have to pay a premium while you're receiving benefits.

Features Of Long-Term Care Insurance

There are many other features of Long-Term Care Insurance that can help customize coverage and reduce stress about long-term health care. We’ll discuss the following lesser-known features of Long-Term Care Insurance in this section:

  • Case management
  • Equipment benefits
  • Informal caregiver training
  • Insurance riders

Case Management

Many Long-Term Care Insurance policies provide a free service, sometimes known as case management. Case management services help policyholders and their families develop a plan of care.

These services usually involve a case manager. Case managers are licensed nurses or social workers trained in long-term health care.

Case managers will evaluate your needs, preferences, available benefits, and other factors to create a care plan. Sometimes they'll even make care arrangements or recommend quality care providers. 

As we mentioned, case management is an entirely free service provided by most policies. You'll typically have access to these services at the beginning of a claim. 

Case managers can help families make difficult decisions about long-term health care. They can find quality care providers in a setting that works for both policyholders and their families. 

If the policyholder wants to remain in their home, the case manager can evaluate the policyholder's home environment and needs to see if that can be safely accomplished. 

If you have questions about your or a loved one's current long-term care coverage, case management services may be able to help.

Equipment Benefits

As we age, we often face the reality of needing help in our daily lives. When that time comes, most of us prefer to receive help and care at home. However, in some cases, in-home care requires special equipment. At the very least, special equipment can make in-home care easier. 

Equipment benefits help cover special equipment and in-home installations. This can include but is not limited to:

  • Wheelchair ramps, chairlifts, & accessories
  • Bathroom grab bars & accessories
  • House handicap modifications/medical alert systems

These benefits can help relieve out-of-pocket costs that a policy may not cover otherwise.

Informal Caregiver Training

Many Long-Term Care Insurance companies provide training for informal caregivers. Informal caregivers are unpaid friends and family who help care for their loved ones. This can be simple things such as grocery shopping or chores. But it can also include supervision or hands-on or stand-by help with activities of daily living. 

Informal caregivers are often untrained and unprepared for the role. Many informal caregivers may not know how to best help their loved ones. For this reason, companies may offer training to help these individuals. 

Training can better prepare friends and families for caregiving. It can protect caregivers from hurting themselves or endangering their loved ones while providing care. In turn, it can also give them the confidence they need to help their loved ones in need. 

Respite Care

Respite care is a feature in many Long-Term Care Insurance policies. Respite care provides short-term relief for unpaid primary or informal caregivers. Respite care is flexible; it can be arranged for an afternoon, several days, or even weeks at a time. 

Policies will pay for caregivers or adult day care on top of regular benefits for a certain period of time each year. This period typically lasts for 30 days, but some policies may offer more than others.

Insurance Riders

Long-Term Care Insurance riders are add-ons offered by most companies. Riders add extra features to the base policy for an additional cost. 

The most popular add-on is an inflation rider. Inflation riders increase the benefits of a policy by a set percentage each year to help offset economic inflation. 

There are several other rider options, and each company offers a different selection. For more information, read this FAQ article on the most common Long-Term Care Insurance riders.

What Are The Key Components Of A Long-Term Care Insurance Policy?

There are many different working parts of Long-Term Care Insurance policies. You can customize the parts of your policy to meet your needs and budget. 

Long-Term Care Insurance policies are designed to help you access and receive the best long-term health care possible. Features such as case management and equipment benefits can help you receive care the way you prefer. 

LTC News wants to inform readers about long-term health care and Long-Term Care Insurance. Here are a few more resources that may be helpful as you learn more about coverage that works best for you:

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