The most common form of Long Term Care insurance policies over the last several decades are generally referred to as “Traditional LTCI”. These policies can be categorized as providing LTCI benefits only, and not combined with any other types of insurance benefits.
Today, the Long Term Care Insurance market offers a variety of product designs and features that make it possible to customize a policy to suit just about any personal situation or budget. They offer a great degree of flexibility in designing benefit options and
rider combinations to suit individual needs and budgets. They also typically have premiums paid over the life of the policy, or sometimes have premium options such as paying premiums over 10 or 20 years or to age 65.
In recent years, LTCI benefits have also become available as part of what are referred to as "hybrid" or "combination" policies. These policies are Life or Annuity products with combined LTC benefits. The popularity of these products is the ability to make a lump sum premium deposit and either receive up to 2-4 times that amount in LTC benefits when needed, or if not needed, they can return the money in the form of Life Insurance or Annuity benefits as they normally would otherwise.
Additionally, many universal life products now have Long Term Care or Critical Illness benefits available which can essentially pre-pay a portion of the life insurance benefit for qualifying LTC or CI events. The addition of these approaches to providing LTCI benefits has increased Long Term Care planning flexibility even further.
Note: The policy provisions and benefit descriptions in this “LTCI Policies Overview” section are intended to be for general information only and policies vary from company to company. Always refer to the specific insurance company Outline of Coverage and Specimen Policy documents for actual policy language.
P.O. Box 310878
New Braunfels, TX 78131
Click Here to Email Us
Basic Benefit Choices
The basic components in a Long Term Care Insurance policy that mainly determine what the premium will be for a policy are the combination of:
Daily/Monthly Benefit Amount
LTCI policies can express the Benefit Amount to be received periodically in different ways. The Benefit Amount can be expressed as a dollar amount of daily or monthly benefit to be received, or it can be expressed as a percentage of the specified Maximum Total Benefit to be received monthly.
Maximum Total Benefit
The Maximum Total Benefit is the maximum that could be paid out over the life of the policy. The Maximum Total benefit can be the result of the daily/monthly benefit amount times a number of years the benefit is payable, typically from 1 to 8 years. Or, the Maximum Total Benefit can simply be expressed as a total amount of money available in the policy, a percentage of which is paid monthly.
Elimination (or Waiting) Period
The Elimination Period stipulates when the benefits begin to be paid from the policy, after the insured is certified as qualifying to receive benefits. Typical Elimination Periods are 7, 30, 60, 90, and 180 days. The Elimination Period is like the deductible in a medical insurance policy. In the case of LTCI, the longer the Elimination Period, the lower the premium
The most important thing to measure is the result - how much benefit do you receive daily or monthly, and how much total benefit would you receive over time?
When you purchase a policy and chose the Benefit Amount, the amounts are usually based on today’s cost of services. However, as the cost of services increases over time, your policy Benefit Amounts could become progressively insufficient to pay the needed costs. Inflation Protection automatically increases both the periodic Benefit Amount and the Maximum Total Benefits of your policy each year to keep up with inflation. The increases choices typically range from 3% to 5% per year or based on some index like he CPI, and can be simple or compound growth rate.
Return of Premium
Return of Premium riders can return some or all of the premium paid under certain conditions, if policy benefits are not used.
Restoration of Benefits
The Restoration of Benefits rider provides that if the insured goes on claim and then recovers and comes off claim, and does not qualify for and receive benefits for a period of typically 6 months, then at the end of the 6 months the rider will restore the Maximum Total Benefit amount to the original level before the claim. The full original amount is then available again for future needs.
Shortened Benefit Period
The Shortened Benefit Period rider provides that if the policy has been in-force for a minimum period of time, normally about 3 years, and then is allowed to lapse, the premium paid into the policy up to that time remains available for the insured to use for claim benefits in the future. In other words, even though the policy has technically lapsed, the insured retains what is essentially a “paid up” policy with a Total Benefit Amount equal to the premiums paid prior to its lapse.
How Do I Qualify for Benefits
The definition, or “benefit trigger” to be eligible to begin receiving benefits from a Tax- Qualified LTCI policy (see Taxation of LTCI) is that you are certified by a physician as chronically ill due to:
The Activities of Daily Living are:
Common Policy Provisions
A few of the policy provisions that are specifically directed at protecting consumers include:
Policies that are guaranteed renewable cannot be terminated by the insurer for any reason – not for increasing age, declining health, claims made against the policy, or for any other underwriting reason. As long as premiums are paid, the policy must be renewed and the insured has the right to keep the policy in-force.
Also known as “Protection Against Unintended Lapse” , this provision is unique to LTCI policies. . The Third-Party Notification allows the insured of an LTCI policy to name a third party who the insurer must notify if the policy is about to lapse for non-payment. This provision is particularly valuable for those with a cognitive impairment.
Like all insurance policies, LTCI policies include a free-look period, typically 30 days, during which the insured can return the policy to the insurer for any reason and receive a full premium refund.