By J’Nel Wright
About 30 years ago, some insurance companies introduced long-term care insurance, which provided a little piece of mind at a premium price but whose cost was a fraction of the anticipated cost of an assisted care facility.
Turns out, long-term care insurance is an extremely popular benefit for seniors. But it is also proving to be a costly policy for insurers. There are over 8.1 million Americans with long-term care insurance. And statistics show that 50 percent of claims last over one year, with an average claim totaling almost four years.
“Your insurance company is super friendly when you are paying the premiums,” said Chad Fotheringham, president of Amada Senior Care. “But when it comes time to pay out on that policy, if there is a way for the insurance company to cut costs, they will try to find it.” That means, you need to understand the terms you agreed to 10 to 20 years ago when you first purchased the policy and understand how those terms apply to the caregiving expenses you face today.
If you are ready to claim your long-term care insurance benefits, here are some important things to understand about your policy before you make that call.
1.Get acquainted with your policy.
Also known as nursing home or assisted living insurance, long-term care was designed to offset the cost of care. But what does that mean? “The first step is to call your provider and find out what that policy covers,” said Chad. “Some people assume a service is covered when it isn’t. Other times, people disqualify themselves simply by calling the insurer and misunderstanding certain questions, or describing their current needs in a certain way.” Before you attempt to make a claim, ask for a policy review, first. If you don’t feel comfortable calling, a third party who specializes in long-term care insurance is happy to look over your policy and contact your insurance company to clarify the important details about eligible benefits.
2.Understand the elimination period.
The elimination period could range from 30 to 90 days. At the time of purchase, many people opted for the longer waiting period because it often meant a lower premium. This period requires you to pay an out-of-pocket expense before your policy kicks in, so it’s important you understand your financial responsibility should you need care. Ask your provider about the details of this period. For example, is it based on standard calendar days or actual days of care?
3. Understand maximum daily benefit.
How much money is your policy paying each day? Chad says the standard policy covers 100 dollars (4 hours) to 250 dollars (8 to 10 hours) per day. The important thing to remember is that this number was pre-set when you purchased the policy. In some cases, that means you haven’t thought about the details for over 20 years. Be sure to check to see if you also purchased an inflation rider to compensate for increased costs in care due to inflation.
4. Understand the maximum lifetime benefit.
Your maximum lifetime benefit is the total amount of money that the FLTSIP pays for charges a policy owner incurs for covered services. It is equal to your benefit period (in days) multiplied by your daily benefit amount. This benefit is often broken down into years. For example, if you purchased a two-year policy and your need for long-term care extends into a third year, only the first two years are covered by your policy.
5. Understand the inflation rider.
An adequate inflation rider can make or break your insurance policy. The value of inflation protection is just that — it increases your benefits each year to compensate for inflation. If you are currently shopping for long-term care insurance, look for a policy that offers a minimum of 3 percent compound inflation protection. This should keep pace with the increase in healthcare and caregiving costs.
6. Waiver of premium
The cost of this service is often built into the policy, itself. This means that once a client is eligible and starts receiving benefits, they no longer need to pay the monthly premiums. While opinions on this feature vary, the truth is, nothing is free. So it’s important you understand how costs are figured, what you are ultimately responsible for paying, and what are your options. In some circumstances, this monthly premium can be waived, so it’s helpful for a third party to look at your benefits to know for sure.
7. Look for hidden benefits.
One of the advantages of talking with an expert is that they can uncover hidden benefits that your insurance provider won’t tell you about. For example, restoration of benefits. If someone starts using long-term care insurance benefits, but then his or her health improves and they don’t need it for a certain time period, it is possible for your maximum lifetime benefits to be fully restored.
With the increasing costs of healthcare, long-term care insurance is quickly becoming an important resource for protecting the financial security of families while providing adequate care. By understanding your policy, you can be sure the benefits you have paid for will be available when you need them most.
This article was originally published by SilverSage Magazine.