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Long-Term Care Policy Terms You Should Know

When you decide to buy a car, you probably research various models, qualities and safety features. Ultimately, this research helps you understand the terminology used by various car manufacturers and ensures that when you go to buy, you make the right choices.


Buying long-term care insurance (LTCi) is a lot like buying a car. You have to understand the terminology in order to get a good idea of each policy’s features and to find the right one for you. Here are some of the most important terms to know.


  • Waiting/elimination period: This is the number of days, either consecutive or accumulated, during which you must pay for care with other funds before your policy will start covering these costs. The longer the elimination period you choose, the cheaper your policy will be—but the more money you’ll have to spend out of pocket to cover costs of care.


  • Daily limit: The daily limit is the amount of coverage your policy offers per day. If the cost of your daily care exceeds this limit, you must pay the difference out of pocket or with other sources.


  • Maximum lifetime limit: Unlike the daily limit, the lifetime limit is the maximum amount your policy will pay out for its duration. Once you hit that limit, even if you didn’t exceed your daily limits, you’re on your own.


  • Inflation protection rider: The cost of care is likely to rise over the years between the time you buy your policy and the time when you finally use it. An inflation protection rider helps ensure that your benefits rise so that they can keep up with inflation too.


  • Benefit period: Your policy may be designed to provide benefits for a specific period of time, such as six months, two years, three years or life. After that period is over, even if you haven’t spent the lifetime maximum, the policy will no longer pay for care.


A long-term care policy provides great coverage, but depending on how your policy was designed, you may find yourself in need of some supplemental protection. Check back in next week when we’ll talk about how you can use life insurance and annuities to do that.


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