Long Term Care (LTC) plans provide insurance coverage as a "Daily Benefit" that you select at time of purchase. This benefit is the dollar amount that will be paid to you or to your provider. Coverage is available in amounts from $50 to $400 a day, for example. Insurers may pay in two ways: as expense-incurred benefits, paid to your provider up to the limits of your policy, or as a daily benefit or indemnity paid directly to you. Your policy should offer a 'bucket of money', allowing you to pay for covered services as needed, such as the care of a nurse or physical therapist, a physician, a home health aide, and be provided in a variety of places, including your home, a nursing facility, through community based services, or in a variety of assisted living settings, such as residential care homes and assisted living facilities. You will also select a length of coverage provision, such as two years, five years, or lifetime.
The average nursing home stay is 2.5 years.
Some people opt to limit coverage to cut premiums, or to provide for care costs during the Medicaid look-back' period. If you are purchasing a policy while younger, you will find that lifetime coverage in not much more expensive.
Other policy provisions and features are:
Elimination Period - Designed to keep you from tapping your benefits until such time as you meet this waiting period. Be aware that you will need to have liquid assets to pay for that care during this period.
Inflation Rider - Even a 3% inflation rate can cut the value of a dollar in half in twenty five years; a 5% increase in inflation, modest when viewed in the context of medical care, will reduce the net purchasing power of a dollar 50% in just ten years! It may pay to purchased an inflation, or cost-of-living, rider. All tax-qualified plans offered today must offer this as an option.
Non-forfeiture benefits - If you drop your coverage, this feature provides for some return of premium, but can affect the premium paid substantially.
Tax-deductibility - You may be able to deduct part of your annual premium as part of a medical deduction. The size of a deduction depends on age. Virtually all policies sold before January 1st, 1997, were 'grand fathered' and are considered 'tax-advantaged.' Benefits paid by a qualified policy aren't usually considered taxable income, even if paid for by an employer.
Return of Premium - Also known as a premium refund, this feature will pay your estate any premiums paid, minus any benefits used. There are also provisions in some policies for an actual "return of premiums paid" if no benefits are used. These can boost the cost of a plan quite a bit.
Waiver of Premium - This provision allows you to stop paying annual premiums once you've begun using benefits, typically in a nursing home. There is usually an age limit involved, typically age 65.
