If you’ve ever bought long-term care insurance for parents or yourself, you know that it can get pretty pricey. You probably bought it because you’re aware of the rising home health care costs, or you’ve seen the prices for stays in nursing homes and assisted living facilities.
Jump ahead to these sections:
- What Is a Benefit Trigger for Long-Term Care?
- How Do Benefit Triggers for Long-Term Care Work?
- Common Benefit Triggers for Long-Term Care
- What Is NOT a Benefit Trigger for Long-Term Care?
- Shopping For a Long-Term Care Policy
- Premium Increases and Cancellations
- Coverage Exclusions
According to a study done by Genworth, the average monthly cost of a semi-private room in a nursing home was $7,756 per month and $8,821 per month for a completely private room in 2020. These costs have led many people to consider long-term care insurance instead of paying out-of-pocket or liquidating assets, like a personal residence.
Receiving claims payment from your long-term care insurance policy often indicates that there has been a sudden event that has lessened a loved one’s ability to live on their own, or the decline has been gradually occurring.
How can the decline be measured, and what part does it play in triggering your long-term care policy? This article will examine what those triggers are and what they aren’t.
What Is a Benefit Trigger for Long-Term Care?
A benefit trigger in a long-term care policy is a requirement that the insured must meet specific needs listed in the policy for the insurance company to begin paying claims submitted for covered services. These services typically include these care arrangements:
- Nursing home
- Assisted living
- Adult daycare
- Home care
- Home modification
- Care coordination
- Future service options
Future service options is a relatively new type of long-term care service that provides flexibility to cover new services not yet developed. This option is generally available if the long-term care policy contains language specifically addressing “alternative options.”
How Do Benefit Triggers for Long-Term Care Work?
A benefit trigger begins with a claim being filed by the insured for care services received. The insurance will cover only services listed in the policy.
Once anybody files a claim, the insurance company's claims department will examine the claim to decide if it qualifies for payment. This often entails the insurer requesting and reviewing the insured's medical records. It can also initiate an examination or testing of the cognitive abilities of the insured.
If the claim is approved, the elimination (waiting) period begins, which is when services are being received by the insured. Still, the insurer doesn't yet start paying claims until that elimination period expires.
The typical elimination periods available are 30, 60, or 90 calendar days. The longer the waiting period selected, the lower the premium will be since the insurance company will likely pay less in benefits over the policy's life.
Elimination periods in a long-term care insurance policy are similar to deductibles in a health insurance policy – claimants must meet certain stipulations before the insurance company pays any claims. Calculating how long the waiting period will be is a significant clause in a long-term care insurance policy and should be carefully considered before you sign the application.
We’ve already looked at the 30, 60, or 90 calendar day elimination period. However, there are insurance companies that use a service day elimination period. This elimination period only counts the days you receive care as part of the elimination period, which can work against you financially.
For example, if you require care three days each week, it might take more than seven months to reach the 90-day waiting period.
Common Benefit Triggers for Long-Term Care
The two benefit triggers are:
- The inability to perform two or three acts of daily living (depending on the insurance company).
- Having significant cognitive impairment.
Acts of daily living are acts that a physically capable person can complete by themselves and perform regularly. The six acts are:
The act of transferring is sometimes referred to as walking, but it refers to the insured moving from their bed to a chair and back.
Significant cognitive impairment includes disorders such as dementia or Alzheimer’s disease. The insurer will often review an insured’s medical records upon submitting a claim concerning cognitive impairment. In addition, an evaluation by a physician is a frequent requirement by the insurance company to determine if an individual’s cognitive impairment has advanced to the stage where they cannot care for themselves.
For example, some people diagnosed with Alzheimer’s disease can still complete the six acts of daily living. Alzheimer’s is a progressive disease, and it can take someone months or years to reach the point where they can’t care for themselves.
What Is NOT a Benefit Trigger for Long-Term Care?
Financial need is not a benefit trigger for long-term care. Though an insured may not have the funds available for services until the elimination period is met, that won’t qualify as a benefit trigger.
Though benefits won’t have started yet, you want to keep paying your premiums to keep the insurance in force (active). Some policies contain a “non-forfeiture provision” that allows you to receive a reduced benefit payment if you stop paying your premium. The amount is based on the total dollar amount of premiums you’ve already paid to the insurance company for your policy.
Some states require long-term care policies to contain a non-forfeiture provision. Check your policy carefully to see if the provision is in there. If your policy doesn’t
have it and you stop paying your premiums, you’ll lose all of the benefits you’ve been paying for and will have nothing to show for the money you spent.
Shopping For a Long-Term Care Policy
The number of insurance companies selling long-term care insurance has steadily decreased from its peak in the early 1990s. Many insurance companies dropped the coverage from their product line because the number of claims and the high dollar amount far exceeded the premiums they were charging.
If you are going to pursue purchasing a long-term care policy, here are seven tips to help you find the policy that best meets your needs:
- Contact your state insurance commissioner and ask for a list of approved insurance companies to sell long-term care policies in your state. Also, inquire about the number of complaints against each company.
- Use the services of an insurance broker to provide you with long-term care options and three quotes from three different insurance companies. Brokers represent multiple insurance companies and can make recommendations based on your needs. The broker should check how often and how much the companies you're considering have raised their rates.
- You want to do business with a company with the financial assets to pay any future claims you might submit. A.M. Best, Moody's, and Standard and Poor's are three rating services that can provide you with details on each of the three companies you're considering. Check each company's financial stability and determine how long they've been selling long-term care insurance.
- Obtain a sample policy identical to the one you’ll be applying for from the company you’ve selected. Many people have a trusted advisor look over the policy, such as an attorney or financial planner. Write out any questions or concerns you have and request that the insurance company respond to you in writing.
- Don’t let an insurance agent pressure you into buying a policy. Take your time; it’s an important decision you’ll be making that could significantly impact your financial life in the future. If the agent is too pushy, work with another agent. You want to work with someone you are comfortable with because you may need their assistance down the road.
- Never pay long-term care premiums, or any other type of premium, in cash. And, never make your check payable to the agent; always make it payable to the insurance company.
- Just about every state requires that insurance companies give you a 30-day “free look” period where you can review the policy that was issued to you. During this time, if you decide this isn’t the right policy for you, the insurance company must issue you a full refund for the initial premium you paid when you submitted your application.
Premium Increases and Cancellations
Your new policy will contain a provision that you can’t be singled out for a rate increase, which some other types of insurance policies can do. However, your insurance company can raise the rates on a class of similar policies that they issue in your state.
Several states have implemented rate-setting standards that insurance companies must comply with. These standards protect you from not only being singled out. for a rate increase, but they also protect you from an increase so substantial that you could no longer afford the premium.
All long-term care policies are "guaranteed renewable," which means that the insurance can't cancel a policy after it's issued because of an insured's age, physical condition, or mental health status. This is your guarantee that your policy won't expire on you unless you don't pay your premiums on time or you've used up all of the benefits of your plan.
Every insurance company will have some conditions for which benefits aren’t payable, even though you have a policy with them. These non-payable benefits include drug and alcohol abuse, certain mental disorders, and self-inflicted injuries.
These are standard exclusions you’ll find with insurers, and they’ll be written into your policy. Make sure dementia and Alzheimer’s are also included.
As you can see, it’s going to take some time and effort pre-planning for long-term care and finding the right long-term care insurance policy that meets your needs. Take your time and do your homework. Someday, you might be pleased that you did.