Designing Your LTC Plan
When putting together a Long Term Care (LTC) policy, you can be assured that this policy can be customized to fit your needs and lifestyle. There are simple and basic plans available that will provide a starting point, however when discussing an LTC plan, there is no one size fits all. Below are the Core Building Blocks of designing an LTCi policy.
Select a Daily/Monthly Benefit Amount
When deciding on a benefit amount, you will have the option of daily or monthly. This option allows you to collect benefits on a day-to-day or 30-day basis while receiving care. Depending on where you live or plan on living, understanding how much care costs in your area can assist you in making this decision. To find out the average cost of care in your area or a specific location, visit the Cost of Care page.
Select your Benefit Period
The benefit period determines how many years of benefits are available for when you go on claim to receive care. Typically, the average length of a claim results in two to three years, but LTC policies have different options to choose from. Typical benefit periods available in an LTCi policy are 2, 3, 4, 5, 6, 8, or lifetime.
Calculating Total Benefits/Pool of LTC Coverage
The policy limit or pool of coverage is determined by multiplying your daily or monthly benefit by the number of days in your benefit period.
Example For Daily Benefit Policies: a daily benefit of $200.00 multiplied by 3 years of coverage followed by multiplying 365 days in a year gives you a starting total pool of $219,000.
($200/day x 3yrs x 365days = $219,000 total benefits)
Example for Monthly Benefit Policies: a monthly benefit of $6,000 multiplied by the number of years of coverage (3 years) followed by multiplying 12 months in a year.
($6,000/mo. x 3 years coverage x 12 months = $219,000 total benefits)
Select Inflation Protection
Inflation Protection is designed to increase your LTC benefits on an annual basis. Having inflation protection on your policy helps cover the rising future cost of care. Depending on the carrier and product you are considering, there are multiple choices to choose from, and you have the option to purchase limited or lifetime inflation protection. Here are some common choices most LTCi policies offer:
Percentage of Inflation Available: 1% to 5% compound inflation
Duration of Inflation Options: 10 years, 15 years, 20 years, or Lifetime
Decide an Elimination Period
Your elimination period is the length of time between when a claim begins and when benefits are paid out from your LTCi policy. This is also known as the “waiting” or “qualifying” period. Depending on the product and company offering LTCi, elimination periods range from 0 days to 365 days. The most common elimination period purchased today is 90 days.
Select Premium Payment Option
Depending on the insurance company and products available, you can elect to purchase a limited or lifetime premium plan for your LTCi policy. Common limited premium payment plans are the following: Single pay, 5 pay, 10 pay, 20 pay, Pay to age 65.
For Lifetime or Limited premium policies, you can elect to pay premiums as: Annual, Semi-Annual, Quarterly, or Monthly
Additional Optional Riders
Optional riders can help enhance your LTCi policy features. These options allow you to customize your policy even more to your needs and standards.
Here are the most common Optional Riders for LTCI plans:
Waiver of Home Health Care Elimination Period: Elimination period will be waived if care is being received in your home or community-based setting
Cash Benefit: provides additional cash benefits that can be used on long-term care expenses while receiving care in your home
Return of Premium: Should the policyholder pass away, the premiums paid into the policy will be paid to the beneficiary. Most long-term care insurance companies that offer this rider require the policy to be in force for a certain number of years before the rider can be in effect.
Shared Benefit: This rider is available for couples. Allows couples to maximize the value of their coverage by combining the two individual policy limits. This will allow one spouse to have access their partner's benefits when they have exhausted their own benefits. Depending on the product, if one partner passes away the surviving insured will inherit any unused benefits from the decease’s policy limit. Surviving will then only be responsible for their own premium as opposed to paying couples premium.
Survivorship: This rider is available for couples. Should one partner pass away, the policy is completed, paid up and no future premiums are required from the surviving spouse. Most long-term care insurance companies require the policies to be in force for a minimum period of 10 years before this rider will become effective.
Joint Waiver of Elimination Period: This will also waive your partner's premiums even if he/she is not on claim.
Nonforfeiture: This will return part of the premiums that you have paid if you should cancel or let your policy lapse.