Deciphering Long-Term Care Insurance: What Should I Know About My Policy?

By Steven Pongrace, CMFC®

Long-term care (LTC) insurance can be an important component of your overall financial strategy (See: 10 Reasons Why Long-Term Care Insurance Is Essential To Your Financial Plan). However, understanding your long-term care coverage and its benefits may prove difficult, as some terminology can be complex. While it’s important to remember that not all policies are created equally, and specifics can vary based on insurers, this resource is meant to help decipher jargon and terms typically found in LTC insurance policies. The sections below are outlined in the order that they would appear in an actual LTC policy, followed by suggestions about when it may be time for you to initiate a claim.

Schedule of Benefits

A Schedule of Benefits, found within the first few pages of your LTC insurance policy, is a list of benefits included in your specific policy and their limits. It details the daily, weekly, or monthly dollar limits and lifetime maximums associated with each type of care your policy covers. The Schedule of Benefits will also explain elimination or waiting period terms, which is the amount of time that must pass while receiving long term care services before the policy will pay any benefits. Elimination or waiting period terms are more commonly known as a deductible. If you have chosen to add benefits outside of the standard LTC benefits, you will see those “optional benefits,” also referred to as riders, here as well.

Separate definitions and provisions sections will further define the terms used in the Schedule of Benefits and throughout the policy. The Definitions section will explain the meaning of any special terms used in the policy while the Provisions section will describe when one is eligible for benefits, the benefits available under the policy, and the conditions that must be met for benefits to be paid.

Types of Care

The Schedule of Benefits leads into definitions and descriptions of the types of care and associated benefits specific to your policy. Generally, there are three main types* of LTC services that your policy will pay benefits for:

  • Home Health Care
    • Care received at the insured’s home, administered by a nurse, who is employed by licensed home health care provider
    • This type of care is usually the least extensive and not always needed daily
  • Assisted Living Care
    • Care received at a facility where the insured is a resident
    • Services are more extensive than Home Health Care, but less than that of a Nursing Home
    • Assistance with performing any Activities of Daily Living (see below) and medication management are provided, however, individuals maintain an independent lifestyle
  • Nursing Home Care
    • Care is received at a facility where the insured is a resident
    • Services are the most extensive, as individuals likely require constant supervision, skilled nursing care, and/or may have severe cognitive impairments

*refer to the policy for specific definitions of each, as definitions may differ from carrier to carrier

Optional Benefits

Optional benefits are not provided under a standard policy. These are added benefits that may be selected when applying for LTC insurance and come at additional costs. Optional benefits appear at the very end of a policy as Endorsements. The most notable optional benefit is called inflation protection, which allows for your benefit to grow over time and remain competitive.

Another optional benefit is a shared care rider. Shared care riders allow married or unmarried partners (if they live together and have shared expenses for at least 2 years) to essentially pool or combine their benefits if they apply for coverage at the same time, and for identical benefits. This benefit allows for Spouse (A), upon filing a claim, to collect benefits from their Spouse’s (B) policy in the event Spouse (A) has exhausted the lifetime maximum benefit amount provided under their own policy.

If you have additional optional benefits, you can find definitions and explanations for each at the end of your long-term care policy.

Initiating a Claim – Triggering Events

Your policy describes the conditions that must be met to initiate a claim. If you or a loved one experiences either of the triggering events below, contact the insurance carrier to initiate a claim:

  • The presence of a cognitive impairment such as dementia or Alzheimer’s Disease.
  • The inability to perform, without assistance, two or more of the six ‘Activities of Daily Living’ (ADL):
    • Bathing
    • Eating
    • Dressing
    • Toileting
    • Transferring
    • Continence

For a claim to be filed, you will need confirmation from a physician that qualifying conditions are present, and thus, care from a licensed or eligible care provider is necessary.

At Cassaday & Company, Inc., we recognize the complexities of long-term care insurance. We have a team of in-house experts dedicated to providing you with the insight you need to feel confident about your LTC insurance coverage. Our Advanced Strategies Department is available to perform a thorough review and analysis of your existing coverage, answer any questions you may have about your policy, and assist you throughout the claims process. We also provide consultations for those who do not have long term care insurance and may be interested in learning more, or are unsure if a policy is right for them.

To learn more, contact your financial advisor or our Advanced Strategies Professionals at (703)506-8200.


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