At some point in your life you may end up needing long-term care. The longer you live, the better the odds are that you will need that care. By the time you reach retirement age, you stand about a 50 percent chance of needing long-term care; however, if you live to age 85 the odds that you will eventually need long-term care jump to three out of four. Currently, the average cost of a year in long-term care runs over $80,000 nationally. With the average length of stay in long-term care running 2.5 years it becomes clear why many people choose to plan ahead by purchasing long-term care insurance. While having a long-term care insurance policy in place is always a good idea, not all policies are created equal. In fact, the eligibility criteria, benefits and coverage, and exclusions can vary dramatically from one policy to another. If you are considering long-term care insurance you need to understand the lingo. Toward that end, the following are some common terms (and their definitions) found in long-term care insurance policies:
- Benefit triggers – used to determine eligibility for benefits. Most policies look for your inability to perform certain “activities of daily living” (ADLs), such as bathing, dressing, or preparing food.
- Daily benefit – the amount the plan will pay out in benefits each day. Typically, this ranges from around $50 – $350. The daily benefit amount may also vary depending on the type of service, such as $100 for in-home care and $200 for nursing home care.
- Duration of benefits – this refers to the limits of the benefits you can receive and may refer to a time limit or a dollar amount limit. For example, you may be entitled to benefits for up to two years or up to $150,000.
- Elimination period – this is a very important aspect of any LTC policy. Also known as the “waiting period” it refers to the amount of time you must wait before your policy will start paying out benefits. Typical times range from 20 to 100 days.
- Exclusions – conditions and/or services that are specifically not covered.
- Guaranteed renewability – ability to renew your policy and continue to receive benefits despite any changes in your health.
- Inflation rider – protects against inflation by increasing benefits along with the cost of living increases.
- Prior hospitalization – refers to whether or not a hospital stay is required before benefits will be paid out.
- Non-forfeiture option – if you stop paying your premiums for any reason, a non-forfeiture option allows you to receive a reduced benefit based on the amount you have already paid in to the policy.
Understanding some common terms will help you to better understand what you are actually purchasing in a long-term care policy; however, consulting with your Missouri estate planning attorney is the best way to ensure that the policy you purchase is right for your needs and that the policy provides the benefits it claims to provide.
If you have additional questions or concerns about long-term care insurance, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.