When considering a long-term care insurance policy, you should be familiar with the following:
- Daily/monthly benefit
The maximum daily or monthly amount your policy will provide toward the cost of long-term care.
Benefit cap: The maximum benefit amount available under a policy (e.g., $360,000).
- Elimination period
The waiting period before benefits are paid (e.g., 90 days). Opting for a longer waiting period is a good way to lower your premium cost.
- Inflation rider
A provision that helps benefits keep pace with the increasing cost of care. See chart below.
- Shared benefits rider
A provision that allows a couple to share benefits between their policies. For example, if they each have $250,000 of benefits but one partner exhausts his or her entire benefit, that partner can begin drawing on benefits from the other partner’s policy.
- Accelerated premiums/paid up options
You pay higher premiums for a set number of years (usually 10 years or to a certain age, such as 65) and once you reach that final payment, your policy is fully paid up. This allows for people to pay more premiums during their peak earning years, and is a popular option among business owners.
- Free-look period
A 30-day time frame after purchasing insurance, during which you may cancel for a full refund of your premium.
- Guaranteed renewability
Your policy cannot be cancelled, and premiums cannot be increased unless all policies of that type within a particular state are increased together.
- Non-forfeiture provision
If an insurer increases premiums beyond a specific percentage, a policyholder has the option to retain coverage at a reduced level of benefits.
Certain conditions are listed as exclusions for most policies, including alcoholism, drug abuse, some mental illnesses and nervous disorders. Self-inflicted injury is also usually excluded from coverage.