Does Your Long-Term Care Insurance Policy Say What You Think It Says?

Long-term care insurance policies have changed considerably in the past few years, which makes it all the more important that you know what coverage you have. You should request a complete copy of your policy from your insurance carrier to make certain that changes from your original policy were not unintentionally approved by you.

With your policy in hand, check for the following:

Type of Coverage: Does it cover assisted care and/or memory care? Or is the coverage limited to a nursing home (“skilled or intermediate nursing facility”) or home health care?

Maximum Coverage Amount: Do you have the unlimited lifetime coverage that was offered in the policies that were issued several years ago? Or, is your coverage limited to a maximum dollar amount that can’t be exceeded no matter how long you need care?

Maximum Daily Benefit: How much will your insurer pay per day? And, is the amount adjusted for inflation? How does the insurer calculate inflation?

Waiting Period: Benefit payments from your long-term care insurance do not kick in until after the waiting period expires. The waiting period is sometimes called the elimination period because you will not receive any payments under your insurance policy for your long-term care expenses during that time.  Here’s how it works: You first must qualify for, and start receiving, long-term care. Then, depending on the number of days designated in your long-term care insurance policy as the waiting period, no benefits will be paid until that period passes. According to the American Association for Long-Term Care Insurance in its 2012 LTCi Sourcebook, 92% of new policies issued in 2011 had a waiting period of 90 to 100 days. This waiting period is longer than was typical in past years, and possibly reflects attempts to lower the insurance premium.

Qualifications for Receiving Benefits: Long-term care insurance is focused on the basic tasks of daily life. Your policy will state the conditions under which you will qualify for benefit payments. For example, the policy might state that you must be unable to dress, bath and eat without assistance. Whatever the specific requirements, the tougher the requirements that you accept for your insurance policy, the lower the premium typically.

Tax Advantages?: There is a potential for tax savings if your policy meets certain standards under the Health Insurance Portability and Accountability Act (HIPAA), passed in 1996. If it meets those standards, your policy is said to be “tax-qualified”. Long-term care policies purchased before January 1, 1997 are automatically considered to be tax qualified, but only some of the policies issued after that date are tax qualified. One tax advantage is that benefits received under a tax-qualified policy are not taxed as income. Secondly, premiums paid to the insurer on a tax-qualified policy may qualify as an itemized medical expense deduction up to a limit.

Certain provisions are required under Minnesota law. Namely, Minnesota requires long-term care policies to provide the following:

  •  At least one year of coverage, including nursing home or home health care; and
  • Alzheimer’s disease coverage if the policy is acquired before the disease is diagnosed; and
  • An option for inflation protection; and
  • An “outline of coverage” statement explaining benefits, limits and exclusions; and
  • A “guaranteed renewable” provision stating that the policy can’t be cancelled by the insurer unless you fail to pay the premium; and
  • A statement that you have 30 days after taking out the insurance to cancel it.

Be aware of the details on how to qualify for benefits. For example, if the policy requires you to first spend a certain amount of time in the hospital for the condition triggering your benefit claim, you may be denied benefits if your disease is something that typically doesn’t require hospitalization.

Consequently, it is important to know what you are buying. Carefully review your policy, or consider hiring an attorney to review your policy provisions with you.

 ©2012 Wittenburg Law Office, PLLC. All rights reserved.

Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney licensed to practice law in the state where you live. Wittenburg Law does not expressly or implicitly warrant the accuracy or reliability of any of the Blog’s contents. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.

 Bonnie Wittenburg

Wittenburg Law Office, PLLC

601 Carlson Parkway, Suite 1050

Minnetonka, MN 55305