Traditional Long Term Care Insurance. How does it work and how are benefits paid?

Traditional long-term care insurance is a type of policy that helps cover the costs of long-term care services or support when you have a chronic medical condition, disability or disorder that limits your ability to perform daily activities¹. Long-term care can include assistance with personal hygiene, dressing, eating, transferring, toileting, driving, medication management and more³. Long-term care insurance can pay for care given in various settings, such as your home, a nursing home, an assisted living facility or an adult day care center³.

Traditional long-term care insurance works by paying benefits when you meet certain criteria, such as needing help with at least two activities of daily living for 90 days or having a cognitive impairment that requires supervision¹. You may also need a recommendation from a medical doctor to qualify for benefits. 

Before your benefits start, you may have to wait for a certain period of time, called the elimination period, which can range from 20 to 100 days³. The length and amount of your benefits depend on the policy you choose. Some policies have a maximum benefit limit or a maximum duration of coverage, while others provide lifetime benefits³.

The cost of traditional long-term care insurance varies depending on several factors, such as your age, health, gender, location, benefit amount, benefit period, elimination period and inflation protection³. 

Designing a traditional long-term care insurance benefit for a consumer age 55 requires considering several factors, such as the cost of care in your area, your budget, your health status, your family history and your personal preferences. 

Here is an example of a possible benefit design.

• Benefit amount: $200 per day. This is the amount that the policy will pay for each day of qualified long-term care services, up to the maximum benefit limit. This amount should cover most of the costs of home health care, assisted living or nursing home care in Florida, based on the average costs from `search_web("average long term care costs in Florida")`¹³⁴⁵⁶. However, you may want to adjust this amount depending on your expected needs and preferences.

• Benefit period: 3 years. This is the length of time that the policy will pay benefits, as long as you remain eligible for long-term care. The average length of time people need long-term care services is 3 years⁵, but some people may need more or less. You may want to choose a longer or shorter benefit period depending on your risk factors and budget.

• Elimination period: 90 days. This is the number of days that you have to pay for your own care before the policy starts paying benefits. The longer the elimination period, the lower the premium, but the more out-of-pocket expenses you will have to cover. A 90-day elimination period is a common choice that balances affordability and protection.

• Inflation protection: 3% compound. This is an optional feature that increases your benefit amount each year by a certain percentage to keep up with the rising costs of care. Without inflation protection, your benefit amount may not be enough to cover your future needs. A 3% compound inflation protection is a recommended option that provides adequate growth over time.

• Non-forfeiture benefit: Yes. This is an optional feature that allows you to keep some of your benefits if you stop paying premiums or cancel your policy after a certain number of years. Without this feature, you may lose all your benefits if you lapse or surrender your policy. A non-forfeiture benefit can provide some peace of mind and protection in case of financial hardship or change of plans.

Based on these assumptions, the estimated annual premium for this benefit design for a 55-year-old consumer varies from state to state.   The actual premium may vary depending on your age, health, gender, location and other factors. 

You may want to compare different benefit designs and get personalized quotes from multiple insurers to find the best option for you.

If you are interested in buying traditional long-term care insurance or learning more about it, you may want to contact an independent agent who can help you find the best policy for your needs and budget. You may also want to check if your state has a partnership program that allows you to keep some of your assets if you exhaust your long-term care insurance benefits and apply for Medicaid³.

Traditional long-term care insurance can be a way to protect your savings and assets from the high costs of long-term care and give you more choices and control over your care. However, it may not be suitable for everyone. Some alternatives to consider are hybrid policies that combine life insurance or annuities with long-term care benefits, short-term care insurance that covers up to one year of care, or Medicaid planning that involves spending down your assets to qualify for government assistance³.

If you are interested in learning more about traditional long-term care insurance or comparing different options, you may want to consult with an independent agent who can help you find the best policy for your needs and budget. You may also want to check if your state has a partnership program that allows you to keep some of your assets if you exhaust your long-term care insurance benefits and apply for Medicaid³.

(1) What is Traditional Long-Term Care Insurance?. https://www.steadfastagents.com/what-is-traditional-long-term-care-insurance/.

(2) Long-Term Care Insurance Explained - NerdWallet. https://www.nerdwallet.com/article/insurance/long-term-care-insurance.

(3) How To Find The Best Long-Term Care Insurance - Forbes. https://www.forbes.com/advisor/life-insurance/best-long-term-care-insurance/.

(4) Traditional Long-Term Care Insurance | New York Life. https://www.newyorklife.com/products/long-term-care-insurance/traditional.

(5) Traditional Long-Term Care Insurance - Trusted Choice. https://www.trustedchoice.com/long-term-care-insurance/traditional/.