If you are like most people considering long term care insurance (LTCI) you’ve probably asked yourself “what if I never need it?” You could purchase a “return of premium” rider but probably won’t because of the cost. If you are married, “shared policies” or a “shared rider” is a must.
Essentially what a shared policy/rider means is that if one of you exhausts the value of your policy you have access the full value of your partner’s.
Consider this example. You are married or in a relationship and purchase your policy at age 50 with the following benefits
- $5,000 monthly benefit
- 5 year benefit period
- $300,000 lifetime maximum benefit
- 5% compounded inflation rider
- Shared rider
As discussed in a previous post, because you have a 5% inflation rider, your benefits grow 5% compounded on an annual basis. Roughly every 14 years the benefits will double in value, making the value of your policy in this example $1.2 million when you reach age 78. Now if you die peacefully without needing care at age 78, without a shared rider, the value of your policy is lost. However, because in this example you purchased the shared rider, the full $1.2 million dollars will now be available to your spouse or partner in the event that they exhast the value of their policy.
In short, it is a smart choice because the shared rider is relatively inexpensive (about 10% of the total premium) and allows you to buy less coverage overall, while still protecting you from the risk of one of you needing care for a long period of time. The other consideration is to make sure that neither of you needs to die in order for the other to be able to access the other’s policy benefits should one of you exhast yours
Make sure that you check with a long term care expert to compare the cost of this rider with all the companies you are considering.
So you finally decide to purchase a long term care (LTC) policy, you file it away and hope you never need to use it. However, if you do find yourself in the situation where you need care, you should know how you can qualify to begin receiving your benefit payment. As we discussed in a previous post, you will have an elimination period that you have selected, and you will first need to satisfy that prior to getting paid.
There are two ways to qualify for benefit elegilibity, physical need and mental need. In terms in the physical needs, upon diagnosing you, your licensed health care practitioner (this can be your medical doctor, nurse practitioner, or social worker) must certify you are chronically ill and that due to your illness, age, or infirmity, that your need help with a minimum of 2 Activities of Daily Living (ADLs). ADLs include bathing, dressing, toileting, continence, eating and transferring without substantial assistance of another person. It doesn’t matter what causes the need, it could be a car accident, a fall that causes a broken hip, or just mobility issues.
Qualifying with respect to mental needs requires the health care practitioner to certify you will need supervision due to any cognitive impairment (such as dementia, senility, Alzheimer’s etc) that would cause safety concern.
If something does happen that causes you to need help, consult with your health care professional. Make your health care professional aware of the fact that you have an LTC insurance policy and provide them with your broker/agent’s contact information. Your your broker/agent can work with your doctor and the insurance company to facilitate the process to determine if you can receive benefits.
This is the last in a three part series covering the benefit selections required when purchasing a long term care (LTC) insurance policy from any carriers. The first installment focused on the selection of your maximum monthly benefit, the second covered the selection of the length of your benefit period, and this final post will address my recommendations for your elimination (deductible) period.
An elimination period is the number of days that you will be responsible to pay for care before your policy will begin paying. This period begins once your doctor has certified that you are eligible to begin receiving benefits based on your physical and/or cognitive state.
Your options in choosing an elimination period are 0-365 days, in varying increments. The most common elimination period selected is 90 days. The elmination period does not have to be consecutive days but rather can be cummulative. To determine what you should select, I wouldn’t advise going higher than 90 days but do suggest asking your broker for a rate comparison of a 90 versus 30 or 60 day deductible before making a decision.
In 2008, in the worst case scenario if you need care and were responsible for the bills for 90 days it would (on national average) cost you about $20,000. With care cost expected to double in the next 20 years, that same 90 days could cost you $40,000. Balance these estimates with the montly premium comparisons (of 30, 60 and 90 days) to determine the circumstances with which you are most comfortable.
