A.M. Best Rating – A.M. Best Company is a rating service that assigns to insurance companies rating opinions, a Best’s Rating. The Best’s Rating represents an opinion based on a comprehensive quantitative and qualitative evaluation of a company’s financial strength, operating performance and market profile. To view an explanation of Best’s Rating profile go to A.M Best Rating Page
Tax Qualified – Most policies issued are tax qualified. Be sure the one you purchase is tax qualified. There are two issues concerning taxes: premiums and benefit payments. In a tax qualified policy you may be able to add the premium to your deductible medical expenses. You may be able to deduct the amount of premium that is more than 7.5% of your adjusted gross income. The maximum long-term care premium you can add to your other deductible medical expense is based on your age at the end of each tax year.
Risk Classification – Applying for a long term care policy is similar to life insurance. Approval is subject to underwriting, an exam is required, medical records are often checked and depending on the outcome of the underwriting evaluation the person applying could receive a preferred, standard or a decline risk classification. Premiums for a standard policy are higher than a preferred policy.
Daily Benefit – When applying for long term care insurance one of the decisions to make is amount of the daily benefit.
Most of the policies sold today use the expense-incurred method. With the expense-incurred method daily benefits are paid to you or your provider up to the limits of your policy. The insurance company must decide if you are eligible for the benefits (see benefit eligibility) and if your claim is for eligible services. An eligible service may be a facility approved by the insurance company or it may be a nurse or equipment or home modification approved by the insurance company, or it may be a service that is included in your policy. In the indemnity method the insurance company only needs to decide if you are eligible for benefits (see benefit eligibility) then pays benefits to you up the limits of the policy.
Benefit Period – The amount of time the policy will pay benefits. The longer the time the more costly the policy. This is another variable decided when applying
Elimination Period – The elimination period is the amount of time before the insurance company will start paying benefits, the longer the wait the less expensive the policy. Another variable decided upon when applying for the policy. Some long term care policies require the elimination period be satisfied only once.
Benefit Eligibility – To be eligible for benefits most companies require 2 of the six ADLs. The six ADLs are bathing, continence (control of bodily functions), dressing, eating, toileting, and transferring. Cognitive impairment refers to deterioration or loss of intellectual capacity resulting in the need for another person’s assistance or verbal cueing to protect yourself or others such as Alzheimer’s disease.
Hospice Care - A program or facility that provides palliative (soothing of the systems) care and attends to the emotional, spiritual, social, and financial needs of terminally ill patients at a facility or at a patient’s home.
Respite Care – This feature provides benefits that enable your caregiver to take a needed break from care giving duties by paying for a substitute provider. It usually ranges from 14 to 30 days depending on the policy chosen.
Bed Reservation – If you need to leave your long-term care facility for a period of time for temporary hospitalization your accommodations will be reserved paying up to your daily benefit amount. The benefit usually ranges depending on the policy from 14 to 30 days.
Spousal Discount – If husband and wife apply together some companies award a spousal discount. The discount range from 10% to 50%. Some companies have one policy covering both husband and wife.
Waiver of Premium – Premiums are waived usually once benefits start which is when the elimination period is met. Some policies also refund premiums paid during the elimination period. Some companies will also waive the premiums on the spouse if the two policies are issued by the same company.
Guaranteed Renewable – As long as you pay on time, your coverage can never be cancelled. However, that does not mean the insurance company cannot raise the premiums you are paying. To do so, they must raise the rates for all similar policies sold in your state.
Inflation Option – Most insurance companies offer the inflation option. The benefit could be increased on a simple or compound basis. If the increase is simple, the benefit increases by the same dollar amount each year. If the increase is compounded, the dollar amount of the benefit increase goes up each year resulting in a much larger increase over a number of years. Most policies offer a 5% inflation option. Your premiums are increased based on your attained age at the time of the increase of benefits.
Nonforfeiture Benefit Option – Nonforfeiture Benefit Option provide reduced, paid-up protection if the policy lapse. In most cases the policy must have been in force for at least three years and the reduced benefits equal the total of premiums paid.
Restoration of Benefits – If benefits are not needed for a period of time, usually 180 days, then the benefit period will be fully restored.
Pre-Existing Condition – A Pre-Existing Condition is a condition for which medical advice or treatment was recommended by, or received from, a provider of health care services usually in the 6 months prior to the policy effective date.