Unlike Medicare supplement contracts with the contractual provisions that are identical, there can be big differences in long-term care insurance (LTCI) contracts. You need to make sure your clients understand before they buy. An informed client will be a satisfied client when it’s time to ask for referrals. Let’s take a plain-language look at some of these provisions.
Elimination period: With most LTCI contracts, the elimination period has to be satisfied only once. Others require that the elimination period be satisfied for each incident of disability.
Bed reservation: This provision originally reserved your bed in a facility for a certain number of days in the event of hospitalization. Today, this provision varies as to the number of days provided as well as the conditions under which the bed will be held. Some provisions require hospitalization; others are more liberal.
Waiver of premium: Most companies will waive premiums after satisfying the elimination period and when benefits begin. For others, the waiver wait begins with care. Some companies offer joint premium waivers so that when one insured satisfies the conditions, the premium is waived for both people under the policy.
Nervous and mental disorders: A recent liberalization in LTCI policy forms is the elimination of the exclusion for mental and nervous disorders. A number of carriers, however, still exclude these disorders while covering certain types of cognitive impairment—Alzheimer’s disease, for example.
Since more than 80 percent of long-term care is now provided in the home, it is critical that we examine the home-care provisions within LTCI contracts. Here are some of the most important provisions.
- Elimination period for home health care: In some of the newer policies, there is a zero-day elimination period for home health care. Other contractual provisions allow seven days toward satisfying the elimination period if there is one day of service during the week, or they may require that the full elimination period be satisfied. (One day of service equals one day toward satisfying the elimination period.) For a policy today with a $200 daily benefit and a 90-day elimination period, the difference in cost in 30 years for your client could amount to $72,000 (assuming a 5 percent inflation factor).
- Home health care benefit maximumdaily, weekly, monthly: Some contracts provide daily reimbursement for home health care; others allow a weekly maximum in that the daily benefit is multiplied by seven and reimbursement is given for all services provided during the week. The most liberal provision is for monthly reimbursement with the daily benefit multiplied by 30. The difference in the amount of reimbursement can be significant.
- Home health care services: Some contracts require that home health care services be secured through a state-licensed home health care agency; others allow the policyholder to hire private help as long as the caregiver has been licensed or certified by the state. A few insurers authorize care by a spouse, a friend or an unlicensed caregiver.
- Care management: At the time of a claim, some companies require that an independent care coordinator perform an initial assessment, develop a plan of care and assist the family in locating care providers. Others make this benefit optional.
There are also substantial differences in the optional benefits offered in LTCI contracts.
- Paid-up options: In newer policies, there are now single-premium, 10-payment and payment-to-65 options. These options are attractive to younger people because the policyowners can pay all premiums during their working years and have the assurance that they will not be subject to rate increases after the payment period has ended. A number of companies only offer lifetime payments.
- Survivorship benefit: This benefit provides that after the LTCI contract has been in force for a number of years, if one spouse dies, the contract becomes paid up for the surviving spouse. Some companies do not offer this benefit.
- Restoration of benefits: If a disabled insured makes a full recovery and does not require care for 180 days, benefits are restored back to the full maximum benefit before the claim occurred. Some companies do not offer this benefit.
- Return of premium: At the death of the insured, some companies will return all premiums paid minus claims; others will return all premiums regardless of claims. A number of companies do not offer this benefit.
- Worldwide coverage: Most companies provide coverage within the United States and its territories, and Canada; some provide worldwide coverage with a reduction in benefits.
Charles D. Marks, CLU, ChFC, CLTC, AEP, is an LTC insurance consultant in New Orleans. You may contact him at email@example.com.