When looking at long-term care insurance, here are some terms you’ll want to get familiar with.

□ Maximum daily benefit – usually will want to set this to your area’s current cost of nursing home care. The US average is around $200 a day. Most people will select $100 per day or more to cover at least half the cost.

□ Maximum benefit period – 1, 2, 3, 4, or 5 years are common, but 3 years dominates

o Reason 3 years dominates is because the average nursing home stay is 2 years.  3 years provides you one extra year of protection above the average

□ Deductible/Elimination period – 90 – 100 days is most common.  Going below this will significantly increase your premiums.  If you believe you have adequate savings, you can also increase this to see if it will lower your premium

□ Inflation protection – this is almost a necessity.  Although the most costly, I would recommend a 5% compound and go from there.

□ Benefit triggers – inability to perform at least 2 of the 6 ADL’s or cognitive impairment

o ADL’s – Activities of Daily Living – the inability to do activities of daily living (ADL’s) Iis how insurance companies decide when you are eligible for benefits.

o ADL’s normally used are eating, bathing, dressing, transferring from bed to chair, toileting and continence.

□ Guaranteed renewability – premium won’t be increased for an individual, but premiums for a large group of people can be raised

□ Benefits – There are a different approaches and you just need to make sure you understand and are comfortable with the approach you purchase.

o You can have a defined benefit period - in this case you typically have a daily, weekly or monthly maximum benefit allowed.

o You can also have a pool of money concept, where the individual is entitled to coverage equal to a specific dollar amount – payments last as long as the maximum amount of coverage has not been expended.

Some other information that may be helpful:

ü Average stay in a nursing home is 2 years

ü Average cost of a private room in the US is about $80,000/year

ü The cost of long-term care generally ranges from $30,000 - $100,000/year depending on region and type of care

ü LTC policies are not standardized, but most policies contain many of the features above in the terms

ü Medicare will only cover up to 100 days of skilled nursing care, and only the first 20 days are covered at 100% (this is more like short-term care coverage in my opinion)

ü Medicaid looks back 5 years for transfer of assets (I don’t think any of us would purposely choose to go onto Medicaid and into a Medicaid facility if we could plan otherwise).

We hope this helps in your learning about the product.  Please let us know if we can answer any questions. Also, we can make available to you a free Long-Term Care Insurance shoppers guide put out by the National Association of Insurance Commissioners (NAIC). Please contact us and ask for this guide if you are looking for Long-Term Care.