What are the typical caveats and restrictions of Long-term Care Insurance?

There are many to know and understand. For example, try to have a clear understanding about:

Limits on benefits
Benefits are usually described in terms of the amount the carrier will pay per day for care in a nursing home and vary from $75 up to $250 a day. Gain familiarity with the general charges for nursing homes in your area before you buy a policy. Keep in mind that prices will increase by the time you will need care, so all you are obtaining is a reference level to familiarize yourself with the market. Once you know prices in your area you can calculate the range of future charges by following the Rule of 72. This simple formula allows you to determine the length of time it will take for a price to double at a given rate of interest. Assuming a nursing home near you charges $100 per day and that nursing home charges will increase at an annual rate of 6% per year. How long will it take the price to reach the $200 level? The answer is calculated by dividing the number 72 by the interest rate. Seventy-two divided by six gives a quotient of 12. Assuming a six percent rate of inflation, the $100 a day charge will double in 12 years. So if you are 60 years of age and purchasing a policy with the expectation that you may need nursing home care in your early seventies, you should be looking for a policy that will be paying benefits of at least $200 per day twelve years from now.

Home care is growing in popularity with patients and carriers so read policies carefully for limits. Many policies usually agree to pay for home care at a rate that is one-half of the nursing-home rate. Other policies limit the benefits for home care to a specified daily sum or limit the number of hours at a specific rate per hour.

All policies allow you to specify how long you desire benefits to last. Benefit periods range from one year to life. Remember that most nursing home stays are three months or less and many people have illnesses that last for years. Obviously policies with long benefit periods cost more. How do you decide? If you own your home or have a minimum mortgage and will be depending upon Social Security and a company pension for retirement income, you will want to protect your equity in your home in order to preserve a place for your spouse to live. Assume that you will need up to 19 months in a nursing facility at current rates and compute that cost. Compare that to your available assets and you can begin making some intelligent choices.

Carefully consider any limits on benefits if you have a repeat stay in a nursing home. Some policies require that you must be discharged from a nursing home for a stated time period before you can be re-admitted. Others calculate the second admission as part of the first if you return within 30, 90 or 180 days. Does the policy require an elimination period to run again for a second stay? Repeat nursing home admissions are not the rule, so this is a minor consideration when comparing policies.

Under home care provisions, the benefit period is usually more limited than for nursing home stays and benefit periods of one to two years are available.

Calculating when benefits will begin
Most policies do not pay benefits until after a waiting period, commonly called "an elimination" or a deductible period. That means benefits begin 20, 30, 60, 90 or 100 days after you are admitted to a nursing home. Some policies have no elimination period and they naturally cost more. During any waiting or elimination period, you are responsible for paying for your care, but there are significant trade-offs. Having a reasonable waiting period during which you are personally responsible for your care means the insurance company can expect to pay out fewer benefits and accordingly underwriters can establish lower prices for these contracts.

Waiver of premium


Nonforfeiture benefits


Death benefits


Fear of Financial Disaster


Uninsurable tomorrow