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How does Long-term Care Insurance work?

Every long-term care policy is slightly different. Policies can vary in terms of when coverage takes effect, how long benefits will last and how much you will receive. It’s important to understand the differences between policies as you compare options. This is when having a trusted Murphy Insurance associate is extremely valuable.

when does long-term care insurance take effect?

Most policies have a “waiting” or “elimination” period that will apply before benefits start, which can range from days to a year. The length of this period will generally affect the premium price.
Also, policies generally require that certain criteria be met in order for the coverage to take effect and don’t necessarily start paying when you feel it is appropriate. It is important for you to understand the criteria required of the policy you are considering before making a purchase. Some common criteria include:

  • Doctor’s certification that a certain type of care is medically necessary.
  • Demonstration of an inability to perform a certain number of daily living activities, i.e. getting in or out of bed, bathing, dressing, feeding oneself, etc. Inability to perform just one activity may not be enough; however, if you need long-term care or are disabled multiple factors are often affected
  • Test of mental competence. This is required if a policy covers situations where dementia or other cognitive illness requires long-term care even if the person can still perform daily living functions

benefit limits

One aspect that can differ significantly between policies and will impact the premium are::

  • Maximum benefit limits – the total length of time and total dollar amount of coverage after which you need to make other arrangements for payment
  • Daily/monthly benefit limit – a specific amount that will be paid each day or month that long-term care is received, which requires additional costs to be paid out of pocket.

It’s important to understand these factors as they can impact care and will be extremely important if you purchase long-term care insurance as part of an asset protection plan.

eligibility and other considerations

  • Eligibility. Your age and health can impact eligibility; therefore, you may not find a policy that you qualify for or that you can afford if you are already ill or of advanced age.
  • Co-payments. Some plans won’t pay the entire cost and will require you to pay a portion of care costs. While this may require you to spend some of your own funds, it can be significantly better than paying for everything on your own.
  • Inflation protection. The earlier you purchase a policy, the lower the premium. Keep in mind, however, that costs are always increasing, which is something to consider as you make your decisions, as it may increase the importance of your policy having an "inflation protection" provision.
  • Step-down provisions. This is a feature that some policies offer allowing you to reduce benefits that you would receive under the policy. Since premiums may rise overtime, this can be an important feature to help you afford a policy depending on your income and needs.
  • Third party notice. Older adults may suffer from memory loss and could miss a premium payment. This feature requires the long-term care insurance company to notify a specified third party if a lapse in premium occurs before they can cancel a policy.
  • Premium waiver. If your policy doesn’t state that premiums are waived once you begin receiving benefits under a policy, you may have to continue to pay premiums while you are receiving care. If this is important to you be sure to discuss it with your insurance associate.

NOTE:  This information is only a general description of the available coverages and is not a statement of contract. All coverages are subject to all policy provisions and applicable endorsements. Some coverage may be subject to individual insureds meeting underwriting qualifications and to availability within a state.   For further information contact a Murphy Insurance Agency Associate.