Answers to the Most Commonly Asked Questions
About Long-Term Care Insurance (LTCI)
Q. What is long-term care insurance and why should you consider it?
Q. How do private long-term care policies work?
Q. How do you determine the total benefit value of your long-term care insurance
policy?
Q. At what age can you apply for long-term care insurance?
Q. What are the required benefit triggers before your
long-term care insurance policy will pay?
Q. What is a tax-qualified long-term care policy?
Q. How do you apply for long-term care insurance coverage?
Q. Can you change your coverage selections later?
Q. Is your long-term care insurance coverage portable (i.e., can you use it in
other states)?
Q. At what age should you apply?
Q. Why is long-term care insurance so important?
Q. What is a “Partnership” Policy?
Q. Can I share a long-term care policy with my spouse?
Q. How do you find the best policy for you?
Q. What is long-term care insurance and why should you consider it?
A. Long-term care insurance is a relatively new type of coverage which allows you to transfer some of the risk of needing expensive long-term care service to an insurance company in return for the payment of a premium. You should consider this type of policy to help protect your income and assets, help obtain quality care and avoid dependence on others, including your family and the government.<top>
Q. How do private long-term care policies work?
A. That’s easy. You pay a premium — which is based on your age when you apply and is projected to stay the same year after year — and in return the insurance company gives you access to insurance benefits. These insurance benefits are made available to you if you need long-term care in the future and meet the requirements in the policy.
When you buy a policy, you can design a plan to fit your needs and budget. To do so, you make five choices.* You select:
- Your benefit period. This is the length of time, after you file a claim, that the insurer will pay you a set dollar amount per day or month (depending on the policy) to cover the cost of your care. This is commonly called a "daily or monthly facility benefit." Choose anywhere from 1-Year (365 Days) to 10 Years (3650 Days). You can even choose a Lifetime policy. A Lifetime policy has no limit on the length of time benefits could be paid to you for covered care.
- Your nursing-facility benefit amount. This is the maximum amount per day the insurer will pay for your care in a facility such as a nursing home or assisted living residential care facility. The minimum and maximum you can choose per day or month varies between companies. Many policies require you to select in $10 increments.
- Your home-care daily benefit amount. This is the maximum amount per day the insurer will pay for at-home care. Most companies ask you to select the amount you want in terms of a percentage of your nursing-facility benefit. Typical options include 100%, 75% and 50%.
- Your elimination period, or deductible. This is the number of days which you must pay out of pocket when you first need covered care. Generally, you can choose from first day coverage up to a one-year wait.
- An inflation protection option. Available for additional premium, this feature will increase your daily maximum amount over time to help keep up with inflation. Choose either a "5% simple" or a "5% compound." For applicants up to age 65, we generally recommend 5% compound; for applicants age 66 to 75, we generally recommend 5% simple; and for those age 76 and older, we recommend you forego this option and simply buy more daily benefit than you'd actually need today. Some policies tie inflation coverage to the Consumer Price Index (CPI) rather than a fixed amount, usually 5%. Make sure you ask the agent and understand which level of inflation protection is right for you.
*Not all features and benefit options are available in every state. <top>
Q. How do you determine the total benefit value of your long-term care insurance policy?
A. With all the long-term care insurance plans we survey, the total value of your policy is determined by multiplying the number of days in your benefit period by your daily or monthly benefit. For example: If you selected a benefit period of 5-Years (or 1825 days) and a daily benefit of $100, your total policy value would be $182,500 (1825 days multiplied by $100). If you elected a benefit period of 4-years (or 48 months) and a monthly benefit of $4500, your total policy value would be $216,000 (48 months multiplied by $4500). Of course, if you elect inflation protection, this amount will increase over time.<top>
Q. At what age can you apply for long-term care insurance?
A. With most companies, those 18 to 84 can apply for long-term care insurance. There are a few insurance companies that allow applicants beyond 84. Also, most companies go by your age the day you sign the application. However, some go by age nearest birthday.<top>
Q. What are the required benefit triggers before your long-term care insurance policy will pay?
A. Make certain you understand the benefit triggers. These are the requirements you have to meet before the policy pays you benefits. With a tax-qualified policy, there are two: an inability to perform two of six basic activities of daily living or cognitive impairment, with care expected to last for a period of at least 90 days. You only have to satisfy one. Note: Certification of eligibility and a written plan of care prescribed by a licensed health care practitioner is required.<top>
Q. What is a tax-qualified long-term care policy?
A. In 1996, the U.S. Congress enacted the Health Insurance Portability and Accountability Act (HIPAA). HIPAA created "qualified long-term care insurance." If a policy meets the Act's requirements, it receives certain tax advantages. As of January 1, 1997, premiums paid for qualified long-term care insurance may be deductible as a medical expense for Federal income tax purposes, up to a specific limit, based on your age. This means you can claim your premiums as itemized medical deductions in Schedule A, Form 1040, if they — in addition to other medical expenses — exceed 7.5% of your adjusted gross income. Also, benefits you receive from a qualified long-term care insurance policy are generally not subject to Federal income taxation. All other policies are considered to be "non-qualified." Note: Businesses and self employed individuals were also given favorable tax incentives. Click here for further information. Consult your tax advisor.<top>
Q. How do you apply for long-term care insurance coverage?
A. In most cases you do not need to take a physical to apply for long-term care coverage. Once you've selected a policy and your coverage options, you complete an application and submit it with a small deposit (usually two months' worth of the premium). Your eligibility is based on your answers to the application questions, a review of your medical records and, in some cases, a face-to-face assessment, or telephone interview, with a nurse. The approval process usually takes four to six weeks. You'll be glad to know there's no risk to you to apply. By law, every policy comes with a 30-day right to review, or "buyer's remorse clause." If you change your mind, you can receive a complete refund by simply returning your policy during the free-look period.<top>
Q. Can you change your coverage selections later?
A. You can decrease benefits at any time in the future and there's no downside to do so. Most companies will reduce your benefit amount or benefit period and reduce your premium proportionally, usually based on your age at the time you purchased your original policy. Increasing benefits in any way usually requires you to re-apply at your current age. Typically, it's not recommended. Check to see if your policy has a "guaranteed purchase option (GPO)" which does give you the option every few years to buy more coverage at your current age without underwriting. (Note: GPO is one form of inflation protection.)<top>
Q. Is your long-term care insurance coverage portable (i.e., can you use it in other states)?
A. Yes, by law, you can use your benefits in any one of the 50 United States or its territories. Some policies extend coverage to Canada and some extend it worldwide.<top>
Q. At what age should you apply?
A. The sooner, the better. Here are three good reasons not to delay:
- Your premiums are based on your age at the time of application. So the sooner you apply, the easier and less expensive it is to get coverage.
- Once you're approved, your rate does not go up as you get older or if your health deteriorates; however, the insurance company may increase premiums on an entire class basis — not just your policy.
- The longer you wait, the greater your chance of becoming uninsurable. Your eligibility is based on your physical health and mental acuity at the time of application. Generally, the sooner you apply, the easier it will be to get coverage. Nationally, approximately 20% are declined by the insurer due to existing medical conditions.* Don't let that happen to you.
(*Source: American Association for Long-Term Care Insurance, 1 in 5 LTC Insurance Applicants Are Declined, March 8, 2005)<top>
Q. Why is long-term care insurance so important?
A. Let's face it, your risk of needing long-term care — and therefore using this type of insurance — is exceptionally high. In fact, it's much greater than many other risks you face in your life — risks you wouldn't consider going one day without insuring. Consider this:
- The chances of needing to use your homeowner's insurance are 1 in 88; the chances of having an auto accident are 1 in 47. Yet chances of needing long-term care are more than 2 in 5.**
(**Source: Senior Market Advisor, The Long Term Care Solution, December 2004.)
With odds like those — and with that large of a potential financial loss — doesn't it make sense to insure your financial security and your retirement dreams?<top>
Q. What is a “Partnership” Policy?
A. A partnership policy must meet the requirements set by each individual state participating in the program. Most of the major insurance companies have partnership-qualified plans available in states where the program is available. The Partnership Program is a public-private partnership between states and private insurance companies designed to reduce Medicaid expenditures. The program allows consumers purchasing these plans to earmark a certain amount of dollars that they can keep and still qualify for Medicaid. Only a licensed agent who has taken the state sponsored training may sell you one of these policies. Long-Term Care Quote is qualified to sell partnership plans in all available states. Ask us about whether your state participates and whether a partnership long-term care insurance policy is right for you.<top>
Q. Can I share a long-term care policy with my spouse?
A. If both you and your spouse are purchasing long-term care insurance, a "shared care" policy may be able to give you more coverage for less money. While "shared care" policies generally cost more than buying two separate policies, it allows you to buy a shorter policy with a pool of benefits that you both can share. This benifit is generally offered as a rider for additional premium; however, some companies offer "joint policy". Make sure you speak with an agent and understand the pros and cons before purchasing a shared care policy.<top>
Q. How do you find the best policy for you?
A. There's really only one way. Do your homework and then comparison shop. That's right. You must take the time and expend the energy to thoroughly compare different companies, policies and premiums. And that's where our innovative, consumer focused insurance comparison service can help.<top>
We do all the tedious, time-consuming comparison shopping for you, we show you the results and allow you to make an informed decision with relative ease and no hassle. We even help you apply for the policy of your choice. In fact, that's our goal: If you determine you need coverage and are eligible, we want you to apply through our agency. That's how we get paid.
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