Today, long-term care insurance policies are not standardized like Medicare supplement insurance. Companies sell policies that combine benefits and coverage in different ways.

How Benefits Are Paid

Insurance companies that sell long-term care insurance generally pay benefits using one of two methods: the expense-incurred method or the indemnity method. It is important to read the literature that accompanies your policy (or certificate for group policies) and to compare the benefits and premiums.

When the expense-incurred method is used, the insurance company must decide if you are eligible for benefits and if your claim is for eligible services. Benefits are paid either to you or your provider up to the limits in your policy. Your policy or certificate will pay benefits only when you receive eligible services. Most policies bought today pay benefits using the expense-incurred method.

When the indemnity method is used, the benefit is a set dollar amount. The insurance company only needs to decide if you are eligible for benefits. The specific services are not important. The insurance company will pay benefits directly to you up to the limit of the policy.

What Services Are Covered

It is important that you understand what services your long-term care insurance policy covers and how it covers the many types of long-term care services you might need to use. Policies may cover the following:

There are several ways policies may cover home health care. Some long-term care insurance policies only pay for care in your home from licensed home health agencies. Some also will pay for care from licensed health care providers not from a licensed agency. These include licensed practical nurses; occupational, speech, or physical therapists; or licensed home health care aides. Other policies may pay for services from home health care aides who may not be licensed or are not from licensed agencies. Home health care aides help with personal care. You may find a policy that pays for homemaker or chore worker services. This type of policy, though rare, would pay for someone to come to your home to cook meals and run errands. Generally, adding home care benefits to a policy also adds to the cost of the policy.

NOTE: Most policies don’t pay benefits to family members who give care in the home.

Where Services Are Covered

You should know what types of facilities are covered by your long-term care insurance policy. If you’re not in the right type of facility, the insurance company can refuse to pay for eligible services. New kinds of facilities may be developed in the future and it’s important to know whether your policy will cover them. Some policies may pay for care in any state-licensed facility. Others only pay for care in some state-licensed facilities, such as a licensed nursing facility. Still others list the types of facilities where services will not be covered, which may include state-licensed facilities. Policies often will not cover homes for the aged, rest homes, and personal care homes. Some policies may list specific points about the kinds of facilities they will cover. Some will say the facilities must care for a certain number of patients or give a certain kind of care. When shopping for a long-term care policy, check these points carefully and compare the types of services and facilities covered in the policy. If your policy lists kinds of facilities, be sure to check if your policy requires the facility to have a license or certification from a government agency.

NOTE: If you are NOT placed in the kind of facility specified by your policy, the insurance company may not pay for the services you require.

What Is Not Covered (Exclusions and Limitations)

Most long-term care insurance policies usually do not pay benefits for:

NOTE: In most states, regulations do not allow insurance companies to refuse to pay for covered services for Alzheimer’s disease that may develop after a policy is issued. Ask your state insurance department if this applies in your state. Nearly all policies specifically say they will cover Alzheimer’s disease.

Excerpted from "A Shopper's Guide to Long-Term Care Insurance." Copyright © National Association of Insurance Commissioners, 1999. All rights reserved.

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.

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