Long Term Care Insurance

Another type of policy indirectly related to medical expense policies and the concept of disability is the increasingly popular long-term care (LTC) policy.

LTC insurance is designed to pay a fixed dollar benefit to the insured to offset the costs of long-term or convalescent care. While there is no age requirement to receive benefits from an LTC policy, they are typically purchased by elderly persons concerned that their advanced age may affect their ability to perform activities of daily living. Many policies pay part or all of a stated benefit when an insured needs care, either in the home or in an assisted living facility, for loss of one or more of the six activities of daily living (ADLs).

Activities of Daily Living:

• Ability to feed yourself
• Ability to bathe yourself
• Ability to maintain continence (use the bathroom)
• Ability to transfer (move from bed to chair unassisted)
• Ability to dress oneself (Dressing)
• Ability to use the toilet (Toileting)

Most policies require the insured to be unable to perform at least two out of six ADLs. Policies that pay benefits based on the loss of only one ADL are rare.

There is usually a probationary period for pre-existing conditions (6-month maximum) on new policies, but when replacing an LTC policy with a new LTC policy, no new probationary periods may apply.

An insurer may not cancel an LTC policy solely on the grounds of age or the deterioration of the mental or physical health of the insured. Mental disorders (including Alzheimer’s) caused by illness or accident are covered.

An Outline of Coverage and Buyer’s Guide must be delivered by the producer to the applicant at the time of the application or if sold via correspondence, no later than the time the policy is delivered. This Outline of Coverage must plainly state that premiums may increase.

The owner of an LTC policy is entitled to appoint someone in addition to themselves to receive premium notices, receive notice of cancellation, and to pay policy premiums.

Free Look (Right to Examine)

An individual policyholder who purchased LTC coverage has the right to return the policy within 30 days of delivery and have all of the premium refunded if not satisfied for any reason.

All individual LTC policies must be guaranteed renewable (non-cancellable may also be offered, but it is not required), and such a provision must appear on the first page of the policy.

Home Health Care

If an LTC policy covers home health care, the insurer may not first require that the insured have care in a facility, home, or community setting before home health services are covered.

Inflation Protection

No insurer may offer an LTC policy unless the insurer offers, at the time of application, the option to buy inflation protection.

Exclusions

LTC policies may exclude certain mental illnesses (but not Alzheimer’s disease or other age-related cognitive impairments), alcoholism, drug addiction, acts of war, criminal activities, self-inflicted injuries, personal aviation, and treatment outside the United States.

LTC policies can be structured to pay benefits directly to a qualified facility or to the insured, who then uses the funds to offset the cost of care. While LTC policies may offer lifetime benefits, most are issued with a set benefit period (such as 2, 5, or 10 years). By law, all policies must provide at least 24 months of coverage.

Lesson Summary

Long-Term Care (LTC) insurance policies are becoming increasingly popular and are related to medical expense policies and the concept of disability, aiming to assist with long-term or convalescent care costs. Here are some key points related to LTC policies:

• No age requirement to receive benefits, often purchased by elderly individuals worried about decreased ability to perform daily activities.
• Benefits provided when insured individuals need care for the loss of two or more of the six Activities of Daily Living (ADLs), including:
  • Ability to feed oneself
  • Ability to bathe oneself
  • Ability to maintain continence
  • Ability to transfer unassisted
  • Ability to dress oneself (Dressing)
  • Ability to use the toilet (Toileting)
• Standard eligibility is the inability to perform at least 2 of the 6 ADLs. Policies paying benefits for just one ADL impairment are rare.
• There is usually a 6-month probationary period for pre-existing conditions on new policies.
• If replacing an LTC policy with a new one, no new probationary periods may apply.
• Insurers cannot cancel an LTC policy based solely on age or deteriorating health.
• Mental disorders caused by illness or accident, including Alzheimer’s, are typically covered.
• Outline of Coverage and Buyers Guide must be provided to applicants at the time of application or no later than policy delivery.
• Individuals have a 30-day “free look” period to return the policy and receive a full premium refund.
• All individual LTC policies must be guaranteed renewable (non-cancellable is optional), and this provision must appear on the first page.
• If covering home health care, insurers cannot mandate facility care before home health services are covered.
• Inflation protection must be offered at the time of application.
• Exclusions in LTC policies may include specific conditions like certain mental illnesses (but not Alzheimer’s or other cognitive impairments), alcoholism, drug addiction, and others.
• LTC policies can pay benefits to a facility or directly to the insured to offset care costs.
• While usually intended for lifelong coverage, policies must have a minimum benefit period of 24 months by law.

Chapter Vocabulary