1.
How do I know if I need
the inflation protection optional rider for my LTCI
policy?
2.
What is the difference
between Simple and Compound inflation protection.
3.
What is Indemnity vs.
reimbursement?
4.
What is the difference between informal care vs.
formal care?
5.
What are the pros
and cons of using a licensed health care agency?
6.
What is the difference between an elimination period and
a certification period?
7. What is Claims Offset?
1.
How do I know if I need the inflation protection
optional rider for my LTCI policy?
LTCI
industry standards suggest if you are under 70 years of
age, then you should opt for compound inflation.
The reasoning behind this is that long-term care
expenses are expected to triple over the next 20
years. Without inflation protection, a policy
purchased today for $200 per day, will not provide
adequate coverage in 20 years. If you are over 70,
you still may want to opt for simple inflation coverage,
as you may not need to use the benefits of your policy
for another 10 or 20 years and by then, your current
daily benefit period may not keep up with projected
inflation. For a detailed look at how inflation
protection works, see our
30 yr Analysis of Inflation
analysis.
2.
What is the difference between Simple and Compound
inflation protection.
Most
LTCI policies offer two types of inflation protection;
Simple and Compound. Simple inflation adds a %
(usually 5%) each year to the original daily
benefit. For example. if you daily benefit is $100
per day, with this rider you would receive an additional
$5 per day each year. With compound inflation
protection, you would receive a % increase each year on
top of the previous years' increased daily
benefit. For the first year, the inflation
protection is relatively equal, but in future years,
compound inflation protection greatly increases your
daily benefit. For a detailed look at how inflation
protection works, see our
30 yr Analysis of Inflation
analysis.
3.
What is
Indemnity vs. reimbursement?
Different
LTC insurers use different methods to pay back
expenses. With a reimbursement type policy, you
would be reimbursed for expenses up to your daily
benefit. This means if your daily expenses totaled
$175 and your daily benefit is $200, you would only
receive $175. If the policy 'pooled' funds, then
the left over $25 would go back into the pot and extend
the life of the policy. An indemnity policy
reimburses the exact amount of the daily benefit
regardless of the expense. Given the same
situation, even though your expenses totaled only $175,
you would receive $200. You can then choose how to
spend or save the extra $25.
4.
What is the difference between informal care vs.
formal care?
Some policies will pay for home care benefits if a
friend, or family member provide services. This is
considered informal care. Formal care is care
that provided by a home health aide. Carriers may offer coverage for independent ‘aides’ that
are not through a licensed agency. Some carriers
however, require that the aide be state ‘certified’
5.
What are the pros and cons of using a licensed health
care agency?
Licensed health care agencies generally have a large
roster of aides so if one is not available they can
quickly replace the aide. Supposedly agencies
'supervise' their aides as well. However,
aides from a licensed health care agency do not
necessarily have more experienced. Agencies
receive a fee for their services, which means the
aides themselves do not receive the full payment
which can sometimes be cause for a high staff
turnover. The cost of care though an agency is
usually higher.
6.
What is the difference between an elimination period and
a certification period?
In
a tax qualified policy, the policy holder must be
certified, by a licensed health care practitioner, that
he or she will need care for at least 90 days. The
elimination period is more like a deductible in which
the policy holder co-pays for the initial period which
may be 30, 60 or 90 days. You can have a 30 day
elimination period with a tax qualified policy. Although
you must be certified to needs care for 90 days, the
policy would start paying your claim on day 31.
7. What is Claims Offset?
Inflation protection options affect both the
daily/monthly benefit and the ‘pot of money’. With some
carriers, the pot of money is reduced by claims paid.
This is called claims offset and results in less money
to pay out for future claims. Policies with no claim
offset actually provide a greater amount benefits.
For
additional info on any of these topics or if you have other
questions not listed above, please call us at 631-393-5039 or email us at
info@ltcamerica.com.