The Elements of a Long-Term Care Insurance Policy. The 4 key elements of a policy Riders to consider Benefit Trigger State Partnership Programs Tax Qualified. 4 Key Elements of a Policy. Benefit Payments Benefit Multiplier Elimination Period Inflation Protection. Benefit Payments.
The 4 key elements of a policy
Riders to consider
State Partnership Programs
This is the benefit amount that you want to be covered for long-term care expenses. Most policies have a choice of daily or monthly maximums that are reimbursable once the benefit triggers have been met.
Daily maximums range from $50-$400/day in $5 or $10 increments
Monthly maximums range from $1,500-$12,000 in $50 or $100 increments
The Benefit Multiplier is a factor based on time (months or days) used to calculate your initial Coverage Maximum, also know as your total pool of money
$3,000 x 36 month = $108,000
(monthly max) (benefit multiplier) (Pool of money)
If the benefit payments are less than your daily or monthly maximum, benefits will last until your pool of money is exhausted.
Monthly Multiplier options: 24,36,48,60,72,96, or 120
Day Multiplier options: 730,1095,1460,1825,2190,2920 or 3650
An elimination period is similar to a deductible. When you need long-term care, it is the time period during which you must pay for your own care without being reimbursed under the policy.
Elimination Periods: 30, 60, 90, 180 or 365 days
Riders of note:
Calendar Day Elimination Period
Waiver of Home Care Elimination Period
(1st day Home Care)
Inflation protection helps the value of your coverage keep up with the rising costs of care, allowing for annual increases in your daily or monthly maximum and pool of money for as long as your coverage remains in force.
Compound Inflation (3%, 4%, 5%)
Simple inflation (5%)
Future Purchase Option
No Inflation Protection
Please note: inflation is a critical choice when qualifying for partnership coverage. Please review the appropriate inflation choice based on the client’s age.
Your benefit trigger stipulates when you are eligible for benefits. Policies typically require one of these 2 triggers:
Many states offer Partnership programs. These programs usually work on a dollar for dollar basis. If you purchase a long-term care insurance policy, that qualifies for Partnership status, with a benefit pool of $108,000, and you were to exhaust your benefits. Your state would allow an asset disregard of $108,000 (dollar for dollar) should you apply for Medicaid. This would enable you to save some of your assets as they are not counted towards the Medicaid thresholds. In order to qualify for Partnership status you do have to purchase an inflation rider based on age requirements.
Age 60 or younger – Compound Inflation
Age 61- 75 – some form of inflation protection
Age 76 and older – no inflation protection is required
A tax deduction is available to those tax-payers that itemize. A medical expense deduction is allowable to extent that such expenses (including payment of eligible LTCI premium) exceeds 10% of Adjusted Gross Income. Please review code to determine income eligibility and phase in period.
Attained Age in Tax Year Limitation on Premium
Age 40 or Less $370
Age 41-50 $700
Age 51-60 $1,400
Age 61-70 $3,720
Age 71 and older $4,660
This is not meant as tax advice. We recommend you seek guidance from your tax advisor or counsel.