Long-Term Care Insurance Commonly Used Terms
Activities of Daily Living (ADL's) - ADL's are commonly known as bathing, continence, dressing, eating, toileting and transferring. These are a benefit trigger used in Tax-Qualified Long-Term Care Insurance Policies. To qualify for LTC Insurance benefits under ADL's assistance you must need assistance with at least 2 of the 6 ADL's for a period of 90 days or longer.
Adult Day Care - This is care provided in a community based setting for adults who need assistance with personal care or supervision during the day but they do not require 24 hour care.
Alternate Plan of Care - It is difficult for a long-term care insurance company to predict every type of care that will be needed in the future, therefore policies that include this benefit will work with you and your doctor to determine the type of care that you might need that is not specified in your policy. Examples would be additional care, services, supplies, equipment, in home safety devices, home delivered meals, etc. that are not covered in your policy.
Alzheimer's Disease - A progressive, degenerative disease of the brain that causes severe intellectual deterioration. It is the most common form of Dementia.
Assisted Living Facility - This is a residential living arrangement that provides personal care and health services for people who need assistance with ADL's but wish to live independently as long as possible. Assisted Living Facilities are often the gap between living independently in your home and entering a nursing home. Services and the levels of care can vary.
Bathing - An ADL, which includes getting in or out of the bath tub or shower and washing oneself.
Bed Reservation Benefit - While receiving care in a facility, this benefit will pay the facility for you to reserve your bed or room for a period of time outlined in your policy. This can be for any reason, usually due to a hospital stay, visiting a family member or a holiday. Most long-term care insurance policies sold today include this benefit.
Benefit Design - This is where you must decide on the benefits of your policy, such as how much per day do you want your policy to pay, for how many years, how long of an elimination period do you want, what type of inflation protection, etc. Click here to learn more about the benefit design.
Benefit Triggers - This is the term used by the long-term care insurance companies to describe when benefits are to be paid. Benefit Triggers include the inability to perform at least 2 of the 6 ADL's or suffer from a cognitive impairment for a period of 90 days or more.
Benefit Period - This is the amount of time that the long-term care insurance company will pay for benefits.
Benefit Pool (Lifetime Maximum Benefit) - This is the total amount of benefit dollars the insurance company will pay out in benefits. To calculate this, take the daily benefit multiplied by the benefit period. For example if you have a $200 day benefit and a 4 year benefit period, you will have a benefit pool of $292,000 ($200 x 1460 days).
Caregiver - A caregiver is someone who provides care to someone in need. Most caregivers are family members/spouses, however caregivers can also be a paid caregiver.
Care Management Services - This is a service where a professional will help you arrange, monitor and coordinate the long-term care services that best suit you. This is included in most long-term care insurance policies.
Cash Payment - This is where the long-term care insurance company will send a monthly payment directly to you and you can use it however you would like (of course you have to be on claim to receive a check). With a cash policy you do not need to submit monthly bills to the insurance company instead you will receive a payment automatically for up to your daily/monthly benefit amount. There a few long-term care insurance companies that offer a Cash Payment policy.
Chronic Care - Is care needed for a long term illness.
Cognitive Impairment - Effects a person's short or long term memory. Problems with mental function including intelligence, memory, learning, speech and thinking.
Community Based Care - These are services provided to help people stay in their homes independently.
Compound Inflation - This will help the value of your policy keep up with inflation, allowing annual increases in your daily benefit as well as your benefit pool. Compound Inflation will increase your daily benefit each year by typically 3% or 5% of the previous years amount. This should take about 15 years for your daily benefit to double.
Comprehensive - Most long-term care insurance policies sold today are comprehensive, which means they provide care in almost all LTC settings, including nursing home, assisting living, home health care, adult day care, etc.
Continence - An ADL, which is the inability to maintain control of a bowel or bladder function or the inability to perform associated personal hygiene.
Continuing Care Retirement Communities (CCRC) - A retirement complex that offers a wide rage of levels of care.
Core Benefits - These are the main benefits of a long-term care insurance policy. Including benefit period, daily benefit, elimination period, and inflation protection.
CPI Inflation - This will provide adjustments to your daily benefit as well as your benefit pool based on increases from the Consumer Price Index (CPI). This type of inflation is newer to the industry.
Custodial Care (Personal Care) - This is care provided to individuals who need assistance with personal care such as bathing, eating, dressing, etc. This care can be provided by a non-professional.
Daily Benefit - This is a core benefit of a long-term care insurance policy. The daily benefit is the amount the insurance company will be per day when benefits are claimed. They typically range from $50 to $400 per day. The average cost per day for nursing home care in the US is $206. (1)
Dementia - Dementia is the progressive deterioration of the brain, the inability to process thought.
Discounts for Couples - Most long-term care insurance companies will provide not only a discount for married couples but also a discount to same sex partners. In addition, some even offer a discount for just having a spouse even if only one spouse apply's.
Dressing - An ADL, which includes taking on and off clothing and any necessary braces, fasteners or artificial limbs.
Dual Waiver of Premium - Typically long-term care insurance companies will waive your premiums when you start receiving benefits, with the Dual Waiver of Premium this will also waive your partner's premiums even if he/she is not on claim.
Eating - An ADL, which is when one is no longer able feed oneself by getting the food into the body from a plate, cup, etc. or by a feeding tube or intravenously.
Elimination Period - This is a core benefit in a long-term care insurance policy. This is like a deductible, it is the length of time an individual must pay out their pocket before the insurance company will begin paying out benefits. This period will be chosen when the policy is purchased. The longer the Elimination Period the lower the premiums. Typical Elimination Periods are 30, 60, 90, 180 and 365 days.
Exclusions - These are what long-term care insurance policies will not cover. These are typically located in the product brochures or outline of coverage's from the insurance company.
Expense Incurred Method - The policy will reimburse for actual expenses incurred up to the specified daily/monthly amount in your policy. This is the most common method of payment of benefits from the long-term care insurance company.
Free Look Period - This is a provision that is included in all long-term care insurance policies, it will allow you to cancel your policy within 30 days of receiving it for a full refund, for whatever reason.
Future Purchase Option (Guaranteed Purchase Option) - This is a type of inflation protection that gives an individual the option to increase the daily benefit, typically offered every 3 years. Unlike Simple and Compound Inflation protection, this is not automatic and premiums do increase if the policyholder chooses to increase the daily amount, this is based on their age at that time.
Guaranteed Renewable - The insurance companies cannot cancel or make any changes to your policy for no other reason than non-payment of premiums. If premiums are increased, it is for only the entire class of policies, not just an individual policy.
Guaranteed Purchase Option (Future Purchase Option) - This is a type of inflation protection that gives an individual the option to increase the daily benefit, typically offered every 3 years. Unlike Simple and Compound Inflation protection, this is not automatic and premiums do increase if the policyholder chooses to increase the daily amount, this is based on their age at that time.
Hands On Assistance - The physical assistance needed to perform ADL’s when the policyholder (or individual) is unable.
Home Health Care - This can be skilled or non-skilled care provided in the individual's home.
Home Health Care Aide - Individuals that provide hands-on custodial services for assistance with personal hygiene, ADL's and taking medications. This is provided in one's home.
Homemaker Services - Individuals that provide hands-off services such as doing laundry, preparing meals, cleaning, etc. due to your inability to do these services.
Hospice Care - Supportive care provided to the terminally ill (life expectancy less than 6 months). This service is typically provided in one's home or a facility with a homelike setting.
Indemnity Method - The policy will reimburse for a fixed amount per day, regardless of the expenses incurred up to the specified daily/monthly amount in your policy. For example, if you have a $150 daily benefit and you only use $100 of it for home health care you will still receive $150.
Inflation Protection - This is a rider you can add onto your long-term care insurance policy, it provides increases in daily benefit levels to help pay for the expected increases in the cost of long-term care services. Automatic inflation includes Compound or Simple Inflation or there is the Future Purchase Option (GPO).
Informal Care - These are caregivers that are usually unpaid and non-licensed, usually provided by a family member for friend.
International Coverage - Some long-term care insurance policies will provide coverage outside of the USA.
Lapse - Termination of a policy when the premium in not paid.
Limited Payment Option - This is where an individual can pay premiums for a limited period of time. Most long-term care insurance companies will offer Pay to age 65 and 10 Pay (pay up your policy in 10 years).
Lifetime Maximum Benefit (Benefit Pool) - This is the total amount of benefit dollars the insurance company will pay out in benefits. To calculate this, take the daily benefit multiplied by the benefit period. For example if you have a $200 day benefit and a 4 year benefit period, you will have a benefit pool of $292,000 ($200 x 1460 days).
Medicaid - A joint federal and state program that pays for health care services for those with low incomes or those who have very high medical bills that meet the income and asset criteria's. Medicaid will typically only pay for nursing home care.
Medicare - A federal program that provides hospital and medical insurance to people 65 and older and to those with a certain illness or disability. Long-term care benefits are limited.
Noncancelable Policies - Insurance policies cannot be cancelled or rates cannot be changed by the insurance company.
Nonforfeiture Benefits - This is a policy rider that will return part of the premiums that you have paid if you should cancel or let your policy lapse.
Nonskilled Care - Care provided for ADL's and personal care.
Nursing Home Care - Care provided in a licensed nursing home facility for those that are chronically ill or unable to take care of their daily living needs. Skilled care is provided.
Partnership Policy - This is a type of policy that allows you to keep some of your assets should you need to apply for Medicaid after using your policy's benefits. There are currently over 30 states that participate in the Long-Term Care Insurance Partnership Programs. Learn more here.
Personal Care (Custodial Care) - This is care provided to individuals who need assistance with personal care such as bathing, eating, dressing, etc. This care can be provided by a non-professional.
Pre-existing Condition - A sickness, physical or mental condition existing before the policy was in effect. Once you are insured with a long-term care insurance company there is no exclusion for pre-existing conditions.
Preferred Discount - This is a good health discount, it applies to those who are in the normal weight and height category, very minimal health conditions (if any at all), and non-tobacco users. The discount that long-term care insurance companies typically offer is 10-15%.
Qualifying for Benefits - To qualify for long-term care insurance benefits you will need substantial assistance in performing at least 2 of the 6 ADL's or require substantial supervision because of a cognitive impairment for a period of 90 days or more. Your doctor must certify this.
Respite Care - Care provided by a third party that relieves informal caregivers for a few hours to several days and gives them a break from their daily caregiver responsibilities. Respite care is typically included in most long-term care insurance policies, for a typical period of up to 21 days per year.
Restoration of Benefits - If an individual is receiving care and then no longer needs care for an extended period of time (typically 180 days), the insurance company will restore your benefits to their original amount. This is usually an additional rider that long-term care insurance companies offer.
Return of Premium - After the policyholder has passed away, the premiums paid will be given to the beneficiary. Typically most long-term care insurance companies that offer this rider require the policy to be in force for a certain amount of years before it would return the premiums.
Rider - Additional benefits/features to a long-term care insurance policy that change the provisions of the policy. These are at an additional cost.
Shared Care - This enables you to maximize the value of your coverage by combining two individual policies. This will allow you to access your partner's benefits when you have exhausted your benefits or vice versa. Click here to learn more about shared care!
Self Insure - Paying for your long-term care needs out of pocket.
Simple Inflation - This will help the value of your policy keep up with inflation, allowing annual increases in your daily benefit as well as your benefit pool. Simple Inflation will increase your daily benefit each year by typically 3% or 5% of the original years amount. This should take about 20 years for your daily benefit to double.
Single Premium Long-Term Care Insurance Policy - This is a policy that combines life insurance and long-term care insurance, which is sold as a Universal Life Insurance policy that has an accelerated death benefit rider that will pay for long-term care needs if they are needed. Learn more here about single premiums LTC insurance!
Skilled Care - 24 hour rehabilitative care that is usually performed in a nursing home by skilled medical personnel.
Spend Down - To qualify for Medicaid, an individual must spend down most of their income and assets.
Standard Rate - This is the rate category that individuals with certain medical conditions are placed in. In addition to tobacco users and those who are out of the normal weight and height.
Stand-by Assistance - This is where the caregiver stays close to the individual to watch over them and to provide assistance if necessary.
Substantial Assistance - Hands-on or standby assistance with ADL's.
Substantial Supervision - Having the presence of a person directing and watching over someone who has a cognitive impairment.
Survivorship - This is a rider for couples, if one partner dies the surviving partner will not be required to pay premiums. Most long-term care insurance companies require the policies to be in force for a minimum period of 10 years before this rider would become effective.
Tax Deductible - Tax-qualified long-term care insurance premiums are treated as medical expense deductibles. Medical expenses can be deducted from the amount which exceeds 7.5 percent of their adjusted gross income. The amount that can be claimed depends on the age of the insured.
Tax-Qualified Long-Term Care Insurance Policy - These require that in order to qualify for long-term care insurance benefits you will need substantial assistance in performing at least 2 of the 6 ADL's or require substantial supervision because of a cognitive impairment for a period of 90 days or more. Your doctor must certify this. These are the most common policies sold.
Third Party Notice - This is where you can designate the long-term care insurance company to notify someone if your policy is about to lapse due to non-premium payment. This can be anyone - a family member, friend, lawyer, etc.
Toileting - An ADL, this includes getting to and from and getting on and off the toilet, as well as performing personal hygiene associated with toileting.
Transferring - An ADL, this includes moving into and out of a bed, chair or wheelchair.
Underwriting - This is the process by the long-term care insurance company of examining, accepting, or rejecting risks, and classifying them insurable to charge the proper premiums.
Waiver of Premium - This is a provision in LTC insurance policies that waives the premiums while you are receiving benefits.
1.) Genworth 2010 Cost of Care Survey