Maximizing Long-Term Care Insurance Benefits

We have talked about long-term care insurance (LTCI) before.  It is a very good thing, in our view.  We strongly recommend everyone take a serious look at purchasing it, before something happens that would keep them from qualifying.  And, no, we do not sell insurance or get commissions!

Below are some questions that we think folks who are making a choice of which LTCI provider to buy from.  The questions are equally important for people who have already purchased long-term care insurance, as the answers will help them manage their use of the benefits, to maximize them.

The first question is -- Is there a waiting period before benefits can be used?

• This question has some definite twists and turns, depending on the insurance company involved.  Waiting periods can range from zero days (very rare) to 100 days, in our experience.  You want to find out from the insurance company what event starts the clock running.  Is it a doctor's order?  Is it such an order plus the actual start of privately paid care?  Within the waiting period is any agency-provided care required?  If so, is there a minimum number of days?  For example, if the waiting period is 30 days, does the insurance company mean 30 calendar days or does it mean 30 days of actual care?  Obviously, that makes a very big difference.

The second question is -- Does payment of the premium end when benefits begin?

• This sounds elementary, but you really need to confirm it with the company.  Premiums may end when the claim is made or when payment of benefits begin.  Continuing to collect premiums after benefits begin is non-standard.  If you are looking to buy, make sure your company does not do that.

Third question -- Is the benefit a purely daily amount, or is there really a monthly budget that you have the ability to manage?

• Most policies will state that there is a daily benefit.  For illustration, we will use $150 per day.  For some companies, they will pay up to $150 per day, maximum.  If you are authorized for care every day, you will receive up to that amount on any day you have care.  However, some of the better companies actually consider the benefit as a monthly budget.  In other words, if the daily benefit is $150 per day, that would create a pool of $4500 for use in a 30-day month.  In these cases, some days might use less than $150 and some days might cost more, but be managed on a monthly, rather than a daily basis.

Next question -- Whether it is a daily or monthly benefit budget, are unspent benefit dollars available for the future, or do they "disappear?"

• If the daily benefit is $150 and I only use $100, does the extra $50 go into the "bank" to be used in a future period?  Same question applies for a monthly pool -- if I only use $3000 of the $4500 available for the month, does the extra $1500 go back in my "bank" of benefits?

The inflation factor -- Does the benefit keep pace with inflation?

• Is there a guaranteed increase in benefits (either a specified percentage, say 5%, or tied to the Consumer Price Index) over time, or is the benefit fixed forever?  This is definitely something you want to consider.  $100 per day now, while you are healthy and 45, may not be nearly enough after 35 years of inflation.

Keeping the benefit coming -- Is there a recurring validation process required by the insurance company?

• Some companies will send out an RN periodically (every 6-12 months) to do an assessment of on-going need for care.  Others may want an updated doctor's order.  Find out how intrusive this process is going to be.  We have sat through some nasty ones with our clients.

If you have other questions, comments or suggestions about LTCI, we would love to hear from you.  Drop me a line at bertcave@supportforhome.com.