How Much to Purchase

Different policies have specific elimination periods, benefit amounts, and benefit periods. A typical LTCI policy has a 90 day elimination period, since in many instances Medicare may cover the first 90 days of care. The longer the elimination period is, the lower the premium, however, the greater the risk of out-of-pocket costs.

The benefit amount chosen should be based on the cost of care in your area, and the type of care you may want. It is important to consider your current and future health – the health of your parents may be a good indicator of your future health needs.

The benefit period is the length of time your benefit will be paid, typically over 3 years, 6 years, or over a lifetime; the longer the benefit period, the higher the premium. Many insurers have a lifetime cap on the benefits they will pay in total, though the benefit cap may not be reached within the specified benefit period.

Read the Fine Print

Terms and conditions of the contract specify the important details of when and how benefits will be paid. Most long-term care insurance contracts pay benefits under two conditions.

The first is if the buyer has a cognitive impairment requiring extensive supervision. The second is if the buyer is unable to perform two out of six basic “activities of daily living,” or ADLs. Most providers consider the activities of daily living as the following six categories:

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Understanding the basics of long-term care insurance is valuable to selecting the appropriate plan to suit your needs and those of your loved ones. Peace of mind about the next stages of life is a goal we all reach for, and though it may be a difficult subject, having a conversation with your loved ones now can ease the process of long-term care planning.

The value of a long-term care policy greatly depends on your emotional and financial needs, and should be evaluated on an individual basis. Carefully selecting a suitable LTCI can be a safeguard against depleting your assets and protecting your independence, and through proper planning and research, you can keep control of your wellbeing and future.

SOURCES:

1. U.S. Department of Health and Human Services, September 2008.
2. http://online.wsj.com/news/articles/SB10001424052702304756104579449482245063704
3. http://www.aaltci.org/long-term-care-insurance/learning-center/best-age-to-buy-long-term-care-insurance.php/
4. https://www.genworth.com/dam/Americas/US/PDFs/Consumer/corporate/130568_032514_CostofCare_FINAL_nonsecure.pdf

Contributors: Paula Pienkowska is the Director of the Wealth Advisory Group at Riverview Capital Advisers. Alan Arcadipane is a Business Analyst of the Business Advisory Group at Riverview Capital Advisers. Melysa Latham is a member of the Business Advisory Group at Riverview Capital Advisers.