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Long-Term Care Insurance

Simply put, Long-Term Care Insurance is designed to cover the cost of custodial care. It's not not heath insurance that covers various treatments designed to lead to a cure, but "maintenance" type of coverage that covers the cost of daily care at home, assisted living facility, or nursing home. Over the years, the face of Long-Term Care Insurance evolved to meet a growing demand and today, we have four distinctly different types of policies. To trigger pay-out under any of these contracts, one must meet qualifting criteria: (1) inability to perform 2 out of 6 activities of daily living (ADL) or (2) cognitive impairment.

Traditional LTCI

You select from the following categories, each of which affects the final cost: 

Daily benefit amount

Inflation protection

Elimination period

Length of policy

These are reimbursement policies - you pay for services upfront, then submit receipts for reimbursement. Most insurance companies have guidelines for who can provide care, usually excluding family members. Once the insured goes on claim, premiums are waived. Insurers reserve the right to increase premiums prior to activation for care.


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LTC Hybrid

These policies combine life insurance with LTCI, so someone benefits no matter what.

You select the death benefit

Daily LTCI benefit is a percentage of total deat benefit

Elimination period is typically 90 days

The policy terminates when the entire death benefit us used

These tend to be reimbutesement policies, though some are "indemnity", meaning the insurer pays upfront and does not require receipts. Once on claim, the portion of the premium attributed to LTCI will stop, but the life insurance premium will continue.

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Chronic Care Hybrid

These policies are similar to LTC hybrids, but have slightly different qualification rules.

You select the death benefit

Daily chronic care benefit is a percentage of total death benefit

There is usually no elimination period

The policy terminates when the entire death benefit us used

These tend to be "indemnity" policies, meaning the insurer pays upfront and does not require receipts. With most insurers, once on claim, the entire premium will stop, including the portion attributed to life insurane.

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Single Pay Hybrid

These are 3-bucket hybrids, that provide cash value, death benefit, and LTC coverage.

The amount of investment determines all three benefits

LTC benefit will be the highest based on policy design

Most will provide a small residual death benefit even if the entire LTC benefit is used for care

These tend to be reimbutesement policies, though some are "indemnity", meaning the insurer pays upfront and does not require receipts. Since these have a one-time pay design, no additional premiums are required.


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