Long-Term Care Insurance: Designing Coverage To Best Meet Your Needs

You can customize long-term care insurance coverage to match the amount you feel you can pay. Below is an example of different long-term care insurance options -- all from the same program (as illustration only) -- to help you see how different coverage choices can influence the monthly premium cost you would pay. To keep it simple, the illustration only changes one coverage element at a time. The price associated with some of these changes varies by age, while for some other types of changes, the savings do not vary based on your age at the time you buy. The basic coverage design depicted in Plan A is as follows:

Note: The monthly premiums shown here are based on one long-term care insurance program's rates and represents premium costs. Premiums for the exact same coverage described here from a different company will, for a variety of reasons, vary from the rates shown here. These monthly premiums are based on the Federal Long-Term Care Insurance Program (www.ltcfeds.com). You can use the premium calculator there to see how other types of coverage changes would impact the rates, or to explore sample rates for other ages.

Plans B through E show you different ways to reduce your premium costs compared to the coverage described in Plan A. You should examine how the compared to the coverage described in Plan A. You should examine how the premium changes for Plans B through Plans E based on the Plan A (base plan).

Plan B: Same as Plan A, except the elimination period is 90 days instead of 30 days.

Plan C: Same as Plan A, except the lifetime maximum is equal to 3 years, or just under $165,000

Plan D: Pays benefits at $100 per day for facility care and, correspondingly, $75 per day. All other elements remain the same.

Plan E: Same as Plan A, except it does not include Compound Annual Inflation Protection. Instead, each year you can elect to increase your coverage by a set amount (generally five percent of the prior years' benefit amount) and you would pay for that additional amount at the time you elect it.

Age at Purchase	Plan A	Plan B	Plan C	Plan D	Plan E
40	$90	$79	$74	$60	$24
45	$108	$95	$89	$72	$32
50	$130	$114	$107	$86	$43
55	$159	$140	$131	$106	$59
60	$195	$170	$160	$130	$83
65	$248	$216	$204	$165	$120
70	$384	$282	$267	$216	$179
75	$520	$299	$427	$347	$327

How Do You Pay Long-Term Care Insurance Premiums?

Different policies offer different payment options. With most policies, you pay premiums according to a schedule you select -- monthly, quarterly, semi-annually or annually. You may be able to have the premium automatically withdrawn from your bank account, pension check, or paycheck (if you obtain coverage through your employer). Typically you pay premiums until you begin to receive benefits. Then premiums are waived as long as you continue to receive benefits.

With most policies, you pay premiums as long as you are not receiving benefits. However, with some policies you pay premiums only for a specified period -- most often 10, 15, or 20 years. For example, with the 20- year option, you pay a monthly premium for 20 years and then your coverage is fully paid up. If you begin to receive benefits before the 20-year pay period is over, you stop paying premiums while you are receiving benefits. If you recover and have not yet paid in for all 20 years, you resume payments. With some policies you only pay premiums until age 65. A few companies offer a "Single Pay" option, in which you pay for the insurance in one lump sum payment. While they are more expensive than traditional long-term care insurance, the advantage is that the single lump sum payment is the only premium required. These policies typically pay for longterm care expenses and also offer you the option to include a death benefit for your heirs. Some states do not allow single-pay policies.

When Are Long-Term Care Benefits Paid?

When benefits are paid is based on the policy's "benefit triggers." the length of the elimination period you choose, and sometimes when you start receiving paidcare. Policies use objective measures to determine when you need long-term care. These are called 'benefit triggers.' Most policies use Activities of Daily Living and Cognitive Impairment as triggers for benefits. The policy pays benefits when you need help with two or more of the six Activities of Daily Living or when you have a Cognitive Impairment.

Benefits begin to be paid after an elimination period has elapsed. This is the number of days between when a benefit trigger occurs and when you begin to receive payment for services. An elimination period is like the deductible you have on your car insurance, except it is usually specified as a period of time rather than a dollar amount. As noted above, most policies allow you to choose the length of the elimination period, generally 30, 60 or 90 days. During the elimination period, you are responsible for the cost of any services you receive. Policies differ with regard to whether you are required to receive paid care or pay for services to satisfy an elimination period before benefits start.

Once you are eligible for benefits, most policies reimburse the costs you incur for covered services up to a pre-set limit. Some policies simply pay you a pre-set cash amount for each day that you meet the 'benefit trigger' whether you receive paid long-term care services or not. These "cash disability" policies offer greater flexibility but are also significantly more expensive.

Source: U.S. Department of Health and Human Services, National Clearinghouse on Long-Term Care Information, 2009.

This publication is for general informational purposes only and it is not intended to provide any reader with specific authority, advice or recommendations. Where you deem necessary, we suggest that you seek advice regarding your particular situation from the appropriate professional.

U.S. Department of Health and Human Services (HHS).