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Provides the insured with the financial resources of their future health and personal care services, to maintain full and independent lives right in the comfort of their own home or in a residence of their own choice.

The cost of living in a non-subsidized retirement home ranges from $2,500 to $7,000 per month. As per the cost of in-home services, a registered nurse, a medical services aid or a personal support worker will charge between $15 and $30 per hour, at 80 hours per week the cost per month is $4,800 to $9,600 or per year $57,600 to $115,200, Ten years of this service will cost between $576,000 to $1,152,000.

Main Features

• The principal causes leading to a loss of independence are: Alzheimer’s disease, circulatory system diseases (for example, heart attacks), conditions such as hip fractures which are more common among the elderly, as well as stroke and cancer.
• One is considered to have suffered a loss of independence when unable to perform at least two of the six activities of daily living: bathing, dressing, toileting, transferring, eating and continence, or when a deterioration of one’s mental capacities threatens his/her health or safety.
• When applying for LTC coverage, you can select a benefit period of two years, five years or lifetime.
• After the 10th policy anniversary you can decide to stop paying your premium but still remain entitled to a benefit for a reduced period that is equal to the total amount of the premiums paid. However, this benefit will terminate when this amount is reached.
• Supplementary Benefit Options are also available such as Return of Premium at Death and cost-of-living increase in the insurance amount.

TYPES OF LONG TERM CARE INSURANCE

There are three different types of policy structures:

Reimbursement Plans

With this type of coverage you first pay the expense, then submit a claim form for reimbursement. Some but not all Home care policies work this way.

Indemnity Plans

With this type of coverage you purchase a specific daily or weekly amount. Once your claim is verified, the insurer pays you this specified amount regardless of whether your actual expenses are higher or lower.

Both Reimbursement and Indemnity Plans stipulate where you can be receiving care, and who can provide the care to you. They generally will not pay benefits if your care is provided through an informal caregiver such as your spouse.

Income Plans

This type of coverage works similar to disability insurance coverage. Once your claim of the need of assistance is approved, you continue to receive a monthly benefit for as long as you continue to need assistance. This type of coverage allows you to receive your care from anyone you choose, even an informal caregiver. You receive your benefits regardless of where your care is being provided. Because it is more flexible than either a Reimbursement or Indemnity Plan, it usually costs a little more.

WHEN ARE BENEFITS PAID?

Benefits are paid when you are unable to do 2 or more Activities of Daily Living, or when you suffer a cognitive impairment such as Alzheimer’s or Parkinson’s disease.

There are 6 different Activities of Daily Living (“ADLs”) which are:

• Bathing
• Eating
• Dressing
• Toileting
• Continence
• Transferring (getting into or out of bed, sitting down or getting up from a chair – Including a wheelchair)

While all insurers use these measures, they do not all define them the same way. So it is important to look at how these are satisfied.

OTHER THINGS TO CONSIDER

When you are designing your Long Term Care Insurance plan, you should give consideration to the following points.

The Future Cost of Care

Be sure to investigate how much healthcare costs today, but keep in mind this figure will increase due to inflation, an aging population, and advances in technology/medicine. There is no guarantee that the government will finance future programs to the same extent they do today. Build in a safety margin when choosing the amount of coverage you buy. You can also look at Cost of Living Options that will increase your coverage automatically.

How Soon Your Benefits Should Begin

Your policy will contain an elimination period that works similar to a deductible. It is the period of time following your loss of ADLs that must pass before benefits begin to be paid. Typical options include 30-days, 60-days, 90-days, and 120-days. Choosing the shortest can drive up the cost of your plan, but waiting too long can put financial strain on you and your family when the time comes to claim.

How Long Should Your Plan Continue to Provide Benefits

While everyone would like their plan to pay for the rest of their life, not everyone can afford to buy a plan which pays lifetime benefits. Examine other alternatives such as 5-year plans, and 2-year plans. Be cautious about using statistical averages to determine what length of benefit period you should buy. Not everyone falls within the ‘average claim’, and you could end up short on dollars.

Balance is the key when choosing the amount, the elimination period, and the benefit period for your plan; your advisor can help you select what is right for you.

GUARANTEED RENEWABLE:

Long Term Care Insurance is guaranteed renewable coverage. This means the insurer is giving you a guarantee that you can continue the coverage year after year regardless of changes in your health just by paying the premium on time. However, they do reserve the right to change the premiums on any anniversary if they do so for an entire block of their business. In other words, they cannot single you out and increase just your rate, but if they have more claims than they expected, or the cost of care rises greater than they anticipated, they can adjust all policyholders’ rates.

Insurers do their best to anticipate the future, and do not price plans today with the expectation that they will change rates later.

PRECAUTIONS FOR NOT PAYING PREMIUMS:

Your Long Term Care Insurance may be in force for many years before you need to use it. You want to be sure that it does not lapse simply because you forgot to pay the premium. Insurers offer various aids to help minimize this risk. Be sure to ask what measures are available to you. Some companies allow you to list a third party’s name to be notified if a premium remains unpaid. For instance, you may appoint your son or daughter as a third party to notify. Some companies offer Non-forfeiture Provisions. If the premium remains unpaid after many years of paying premiums, the policy may either change to a paid-up policy for a reduced amount, or continue in the same amount for a period of time (“Extended Term Insurance”) after which it will expire.

Premium refunds

When the insured person dies, some insurance companies automatically refund the premiums if no benefits have been paid. Others offer more generous refund plans. Because of this, it is important to ask:

• Does the refund include interest calculated at a pre-determined rate?
• Is the refund subject to a maximum?
• Must the policy have been in force for a minimum number of years to be eligible for a refund?

On payment of a premium supplement, some insurers offer this option even if benefits have been paid. Find out how the premium refund is determined.

Premiums

It is important to determine the following premium characteristics:

• Premiums are payable until what age? Can you limit the premium payment period to a given age or for a fixed number of years?
• Are they fixed or will they vary after a set period?
• Are they guaranteed until the end of the payment period or, if applicable, for each of the predetermined periods?
• Are premium reductions for couples available? If so, under what conditions? Do both policies have to be taken out at the same time? Does the reduction apply to each of the premiums? Is it permanent? Does it apply to future insurance increases (cost-of-living increases)?

Waiver of premiums

• During a period of dependence while you are receiving long-term care benefits, will you have to keep paying premiums, or will a waiver of premiums apply?
• Does the premium waiver clause apply to home care or if the care is provided by a family member or friend?
• When does the premium waiver start? When does it end?
• Is this protection included in the contract or is it optional?

Paid-up insurance

If you had to stop paying premiums after several years, would you be able to maintain your policy and be entitled to benefits? If so, under what conditions? What coverage would be offered? Could you re-establish your coverage as it was before it was paid up? If this is a possibility, would you have to provide proof of good health?

Payment terms

Insurers offer various premium payment methods:

• Can premiums be paid monthly, every three months, twice a year, or yearly? It’s important to compare premiums with the same payment frequency, since a given policy may be more competitive than another at one payment frequency but not another.
• Can premiums be paid by pre-authorized bank withdrawals, by credit card, by check, etc.?

How to compare premiums?

Premiums vary from one product to another and from one insurer to another according to the terms mentioned above, the gender of the insured, the insured’s state of health, smoking status, occupational hazards, etc. The total premium also generally includes fixed fees to cover administrative costs.

This all makes it fairly complicated to consistently compare premiums from one insurer to the next. This is why it’s so important to seek out sound advice to make sure that the product you want to buy meets your needs and your budget.

Delsan Group is there for you, to serve your needs in financial services, financial security and advice.

For more information, contact the Delsan Group.