Long-term care insurance: basics

Have you (or your parents) reached an age that you’re curious about long-term care insurance? You want to know what it is, how it helps you, and what exactly is involved in applying for and getting coverage?
 
Well, you’ve come to the right place.

​Let’s first outline basic features of a long-term care insurance policy. 

​Now, let’s discuss these policy features in plain English:

• Initial monthly benefit: This policy will reimburse you for qualified costs of care up to $6,000 per month.
• Benefit period: You are covered for 4 years based on the $6,000 monthly benefit.
• Total benefit pool: This is your lifetime pool of money. It’s based on a simple math. $6,000 x 4 years = $288,000.
• Elimination period: Should you need care, you have to first wait 90 days before the policy pays you the first dollar. Think of it as the deductible on your car insurance. 
• Inflation protection: Your $6,000 monthly benefit doesn’t stay at $6,000. It increases by 3% every year. For example, if you’re 55 today, it will grow to $14,139.39 at age 85. By extension, your benefit pool increases by the same rate.
• Underwriting class: The Preferred class reflects a healthy person who is a nonsmoker. Based on your health, you can be “rated” or even declined. The better the underwriting class, the cheaper the premium.

Your benefits generally trigger when you can’t perform 2 of 6 activities of daily living (ADLs) listed below:

​We hope this helped you get acquainted with some of the basics of long-term care insurance. 
 
In our next installment, we’ll discuss pricing and alternative products to traditional long-term care insurance.