Policy Features, Options and Riders
Long-term care insurance policies can be customized specifically for your needs and budget. General features of long-term care policies are shown below:
- Benefit qualification criteria
For a person to qualify to receive benefits under a tax qualified long-term care insurance policy, they must be unable to perform 2 of 6 activities of daily living (feeding, bathing, dressing, going to the bathroom, continence, and moving about) or have a cognitive impairment.
- Tax treatment
Premiums are tax deductible on Federal tax returns and when policyholders receive benefits they are received tax free.
- Guaranteed renewable
As long as each premium is paid before its grace period ends, and benefits have not been exhausted, policies are guaranteed renewable; they cannot be terminated or modified with the written consent of the insured.
- Level Premiums
Policies are written on a level premium basis. That is, premiums are determined based on the age of the applicant at the time the policy is issued. They cannot be increased unless they are changes for all similar policies issued in a given state, and approved by the State Insurance Department.
Then if premiums are increased in the future, the policyholder will pay the increased rate based on the age they were when coverage was purchased, not the age they are now.
Many decisions on policy options must be made when designing a long-term care plan. These decisions are different for each person we work with and based on your financial situation, family and personal beliefs. The main policy options are as shown below:
- Daily benefit amount - the amount of coverage you will receive each day on claim once you qualify for benefits.
- Benefit period - the length of time you will receive a daily benefit once you are benefit eligible. If you purchase a three-year benefit for example, your coverage could last longer if you do not need to use your benefit every day.
- Inflation protection - inflation protection will increase the value of your benefit each year to keep up with the cost of care.
Riders are available to customize your long-term care insurance policy. Some of the most popular riders include:
- Shared Care - If both spouses in a married couple purchase policies with a 3 year benefit period, and one spouse needs care longer than 3 years, the spouse that needs care can "share" the healthy spouses benefit.
- Return of Premium - If a policyholder purchases this rider, their estate will receive all premiums paid upon their death, less claims already paid. Individual carrier rules vary.
- Restoration of Benefits - Once on claim, your benefits will be restored if you go off claim for a defined length of time.
- Accelerated Payment Options - Long-term care insurance premiums must be paid until a policyholder is eligible to receive benefits. Accelerated payment options allow consumers to pay the entire premium in a limited time period. For example, with a 10-pay, there are no more premiums payable after 10-years. There is also single pay, 5-pay and 20-pay riders available form some carriers as well as other payment options such as pay to 65.
- Spousal Survivorship - If both spouses own a policy and one spouse passes away, the remaining spouse no longer is obligated to pay their premium.