Merritt Personal Lines Manual: How an LTC Policy Pays
The majority of LTC policies are indemnity contracts. This means that a daily benefit, such as $100 per day, would be paid for each day of care.
However, some LTC policies are based on a reimbursement (or expense-incurred) format. As with many health insurance plans, the insurance company will reimburse you for a percentage -- such as 80 percent -- of actual expenses incurred due to a stay in a nursing home.
Some policies offer a daily benefit for nursing home coverage, but a reimbursement benefit for home health coverage. Still others offer a maximum lifetime benefit amount, from which incurred expenses are deducted.
You'll need to determine how a particular policy will pay when you are comparison shopping. You also may want to look into how much nursing home care will cost in your area, so you can make a wise choice between an indemnity or a reimbursement-style policy.
LTC policies do not have a monetary deductible, like the one you would find on an auto or homeowners policy. Instead, they have an elimination period (EP), which is, essentially, a time deductible. Once an event occurs that would trigger benefits, you will have to wait a certain length of time -- the elimination period -- before you actually start receiving those benefits.
Most insurance companies will offer EPs of 15, 30, 60 or 90 days. Some may offer policies with waiting periods of less than 15 days or longer than 90 days. And some even offer EPs that apply only once per lifetime.
When shopping for LTC insurance, you will need to determine how long you can wait before you begin to receive benefits. Not surprisingly, the longer you have to wait, the smaller the premium you will have to pay.
The Effect of the Elimination Period on Premiums
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| 15 | 30 | 60 | 90 | 180 | |
| Elimination Period (in days) | |||||
It is also important to note that all long-term care policies will contain some exclusions and/or limitations. These typically describe the kinds of claims for which the insurance company will not pay. Common exclusions include:
- losses due to war and act of war;
- losses due to intentionally self-inflicted injuries;
- care for stays in government facilities, such as a veteran's hospital;
- losses that are covered by workers compensation or similar statutory benefits; and
- losses due to mental, psychoneurotic or personality disorders, when there is no physical or organic disease involved.
Mental or personality disorders resulting from an accident, Alzheimer's disease or other organic diseases are covered.
