Do You Know What’s in Your Long Term Care Insurance Policy? (Part 1)

      Bob’s dad, Jim can no longer stay in his home alone. His dementia is advancing and Bob is now ready to move Jim to an assisted living facility. Jim had always told Bob not to worry about how to pay for care if he needs it because he has a long term care insurance policy but Bob had never actually seen it.

      Now that he wants to put in a claim for benefits he looked thru Jim’s papers and found the policy. Jim has a traditional long term care insurance policy. It pays up to a certain dollar amount per day for long term care, in his case $150 per day. This confirmed what his dad had told him for years. There is a lifetime cap as well. In Jim’s case the lifetime limit is $164,250. The policy will last Jim 3 years at the maximum rate of $150 per day. If he needs less than $150 a day of care then the policy could pay out over a longer period of time.

      When Bob looked further, however, he saw some problems. Generally, long term care insurance policies can cover home care, assisted living care and nursing home care but they don’t always cover all 3 or at the same rate of coverage. The more coverage you want the higher the premium.

      Jim has coverage for all 3 but not at the same rate. While the policy will pay up to $150 per day for nursing home care it will only pay 50% of that, or $75 per day for assisted living and home care. Bob was counting on the full amount to be able to cover the entire cost of care with Jim’s Social Security.

      But wait. Jim noticed on the declaration page that Jim chose a 5% inflation rider. This means that each year the maximum per day rate increases by 5% or $7.50. Over the life of Jim’s policy – 20 years – that amounts to another $150 per day, a total of $300 per day for nursing home care. Doing quick math, Bob calculated that with the rider Jim would have the $150 per day he originally thought he had for assisted living care. No problem or so it seems.

      It was what Bob found out next that threw a monkey wrench into his plans. I’ll share that with you next week.

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