LTC Insurance Policy Features

Long-term care insurance policies have unique features that determine when benefits begin, how long they last, and how much is paid. Understanding these features is essential for both the licensing exam and helping clients select appropriate coverage.

Benefit Triggers

Benefit triggers are the criteria that must be met before an LTC insurance policy begins paying benefits. For tax-qualified policies, there are two primary benefit triggers:

1. Activities of Daily Living (ADL) Trigger

The insured must be unable to perform 2 of 6 ADLs without substantial assistance for at least 90 days.

Exam Tip: Tax-qualified LTC policies use these 6 ADLs. Some non-tax-qualified policies may include a 7th ADL: ambulating (walking without assistance).

2. Cognitive Impairment Trigger

The insured requires substantial supervision due to severe cognitive impairment (such as Alzheimer's disease, dementia, or Parkinson's disease) to protect themselves or others from threats to health and safety.

Certification Requirement: A licensed health care practitioner must certify that the individual:

• Cannot perform 2+ ADLs without substantial assistance, OR
• Requires substantial supervision due to cognitive impairment
• Is expected to need care for at least 90 days

Elimination Period

The elimination period (also called the waiting period or deductible period) is the time between when the insured qualifies for benefits and when the policy actually starts paying.

Common Elimination Period Options

Types of Elimination Period Calculations

Key Point: The 90-day elimination period is most common because it balances premium savings with manageable out-of-pocket risk. Calendar day calculations are more favorable to the insured.

Benefit Period

The benefit period is the maximum length of time benefits will be paid. Options include:

Note: Many policies now use a "pool of money" approach instead of strict time periods.

Daily or Monthly Benefit Amount

The daily benefit amount (DBA) or monthly benefit amount (MBA) is the maximum the policy will pay per day or month for covered services.

Typical Benefit Amounts

• Daily benefits: $100-$400+ per day
• Monthly benefits: $3,000-$12,000+ per month
• Should be based on local cost of care

Reimbursement vs. Indemnity

Inflation Protection

Inflation protection increases the daily benefit amount over time to keep pace with rising care costs. This is one of the most important policy features.

Types of Inflation Protection

Exam Tip: Compound inflation protection is more valuable than simple inflation, especially for younger purchasers, because the benefit grows exponentially over time.

Inflation Protection Example (3% Growth)