This Topic Affects So Many of Us

Most of the long term care policies that I review are the ones issued back in the late 90s-early 2000s, so we’re talking 20-30 year old policies, where the insureds are now in their 80s and 90s.

There are some standard items to look for on the first pages of the policy that will help you understand the level of coverage.

  1. Daily Maximum Limit for Facility
    This will tell you how much the insurer will reimburse per day at an assisted living, nursing home or in many cases an adult day care facility.

Example: $500/day means if you choose a place that is $300/day, you’re 100% covered and will not pay anything out of pocket. If you choose a place that is $550/day, the policy will cover the first $500 and the insured will pay the remaining $50 out of their own pocket.

Look for a Daily Limit for Home Health Care as well, as many folks are now looking to be cared for in their own homes. Sometimes it is the same as the facility limit, but sometimes not. It all depends on what was purchased.

2. Lifetime Maximum Limit
This is the max amount the insurer will pay over the insured’s lifetime.

Using the example from above:
Daily Limit: $500
Lifetime Max: $250,000

If you choose a facility that is exactly $500/day, this policy affords you 500 days of coverage.
$250,000 / $500 = 500 days
(Slightly under a year and a half)

However, if you find a facility that costs $350/day, you now have 714 days of coverage.
$250,000 / $350 = 833 days of coverage
(Just over 2 years)

The policy I just reviewed had NO LIFETIME MAXIMUM, meaning the policy will pay $500/day even if the insured needs to drawer on the policy for another 10 years. Statistically, this most likely won’t happen, but this is the coverage that has been paid for.

3. Elimination Period
This is very important and it takes many by surprise.

Most all policies have a period of time from the date a claim is first made to when the insurance company will actually start paying coverage.

I most often see 90 days.

What you want to uncover here is what constitutes a claim under the policy. For example, if mom is having someone come into her home 2x/week to help her bath and dress, you may be able to start a claim then and therefore begin the 90 day elimination period.

Mom will be paying this home health care worker out of pocket for the first 90 days.

But let’s say mom ends up needing full time care either at home or in a facility at day 91 (or anytime thereafter), which will be much more costly, the 90 day elimination period is over and coverage will begin before those much more expensive services kick in.

4. Policy “Riders”
Think of the term “insurance rider” as simply an add on to the base policy that increases the coverage benefit in some way.

Inflation Benefit Rider / Compound Benefit Increase Rider
The benefit amount increases/compounds each year (keeps up with inflation)

Waiver of Premium Benefit Rider
Once there is a claim initiated, you no longer have to pay the annual premium. A good reason to get a claim started sooner rather than later once any level of care is needed.

Indemnity Benefit Rider
From the previous example in #1, if you have $500/day coverage and choose a place that is $300/day, the insurance will still pay you $500/day!

In last month’s newsletter, where I shared my personal experience with my parents, I talked about the importance of having family conversations about these difficult topics. That holds true for this topic as well. It’s overwhelming, I know, but it’s too important to ignore.