What Happens If I Need More Care Than the Benefit Period?

When you hear about Long-Term Care Insurance, both agents and consumers usually talk about 'benefit periods' or benefits that last a fixed time period.

Policies typically have 'benefit periods. Does that mean you only have a policy for so much time - or only have a certain number of years of care?

No. 

It Is Not About 'Time,' But It Is About 'Money'

The benefit period is the minimum length of time an insurance company will pay benefits.

While many Long-Term Care Insurance policies often have a benefit period, there is usually no time limit that defines how long you can receive care services. The benefit period helps calculate the amount of money in your policy at any given time. Long-Term Care Insurance is about 'money,' not about 'time.'

LTC Insurance Creates a Benefit Account

Today, most Long-Term Care Insurance policies are a "pool of money" in a benefit account. What this means is the policy creates a benefit account worth a certain amount of money. Think of this account as a checkbook. The policyholder has money in the checkbook that can be used to pay for long-term care services either at home or in a facility.

There is no "stopwatch" with Long-Term Care Insurance; it is all about accessing tax-free resources to pay for future long-term health care expenses.

How Does it Work?

When you design a Long-Term Care Insurance policy, you start with a specific monthly or daily benefit and an initial pool of money. Benefits are typically expressed with a 'monthly benefit' as opposed to a 'daily benefit.' The benefit period is a mathematical formula to determine the amount of money in your benefit account.

Some companies create the initial benefit account by using a benefit period. They do so with a math formula - the number of days or months in the benefit period x the daily or monthly benefit = the initial benefit account or pool. 

At the time of claim, if you don't use the maximum, you are entitled to each month, or each day, you don't lose the remaining benefit. The money stays in the benefit account and continues to grow with inflation (if you selected an inflation benefit). The inflation benefit increases your monthly benefit (or daily benefit) and the benefit account by a specified amount (i.e., 3% compounded).

An Example

Take a look at this example:

At age 50, you select $4000 a month with a three-year benefit period. 

The math formula is:

(4000 x 12) x 3 = $144,000

The policy in this example would start at $4000 a month with $144,000 in the benefit account. If the policy has a 3% compound inflation, both the monthly benefit and the benefit account grow every year. The increased benefits are already factored in the cost of the premium. 

If you are age 50 when you get the policy in this example, your benefits at age 85 would be:

 $405,196 total in the benefit account

 $11,255 a month in benefits available

There are insurance companies that have done away with the 'benefit period." The policyholder selects an initial monthly benefit and an initial amount of money in the benefit account. Otherwise, it works the exact same way.

Unlimited Benefits and Shared Spousal Benefits

Unlimited benefits are not available with most insurance companies. However, if you have unlimited benefits, it means you could NEVER exhaust your benefits.

Many companies offer shared spousal benefits so that a couple can share benefits between the two partners. This shared benefit works a little differently with each company but is a popular option to add additional flexibility affordability. 

The larger your initial benefits, the longer your benefits will last when you need long-term health care. Most Long-Term Care Insurance claims start with in-home care and slowly progress.

Designing an Appropriate Plan

You can design a plan to safeguard an amount of assets from the high costs and burdens that come from long-term health care. Most states participate in the Long-Term Care Insurance Partnership program. With a partnership policy, you can shelter part of your estate based on the total amount of benefits paid by the policy and still access Medicaid. 

The partnership allows you to purchase the right amount of coverage without over-insuring. Even a modest Partnership LTC policy packs a lot of asset protection at a very affordable cost. 

A qualified and experienced Long-Term Care Insurance specialist can work with you to design an appropriate plan that fits your budget and needs. 

Premiums can vary over 100% between insurance companies. In addition, each company has its own underwriting rules. The specialist can match you with affordable coverage.

What Happens If You Exhaust All Your Benefits?

It can happen. Unless you have unlimited long-term care benefits, you could exhaust all the benefits in your Long-Term Care Insurance policy. 

What happens then?

Unless you have a spouse or partner and included a shared benefit option, you have few options. 

If you exhaust all your benefits and still require care services, you will have to start paying out of pocket. You would still be that far ahead since your policy had been paying the entire time before exhausting benefits.

If your policy is partnership certified, you would have the dollar-for-dollar asset protection of your state's partnership program.

Remember, you design your policy when you apply for coverage. A Long-Term Care Insurance specialist will guide you, so it would be unlikely to exhaust benefits unless you purchase a minimal plan.

However, even a small policy has powerful benefits. If you are very concerned about the possibility of exhausting benefits in the future, discuss the availability of unlimited benefit policies or plans with very large initial benefit accounts making the likelihood of exhaustion unlikely.