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Key Characteristics of Long Term Care Insurance


Long term care insurance provides reimbursement of covered expenses for facility care and home care when the insured is unable to perform at least two of six activities of daily living (ADLs) as certified by a physician. These six activities are eating, bathing, transferring, toileting, continence, and dressing. Cognitive impairments such as Alzheimer’s disease also qualify the insured for benefits.

Key Long Term Care Insurance Variables

1. Amount of In-Facility Monthly Benefit – The average daily facility care cost in Wisconsin ranges from $178 to $204 in 2007.

2. Home Care Benefit – It is usually between 60% and 100% of the in-facility benefit in #1 above.

3. Elimination Period – The waiting period after qualification but before benefits begin (like a deductible) is usually 30, 60, 90, or 180 days.

4. Duration of Benefits – The maximum length of time benefits can be payable ranges from 1 year to an unlimited duration. The average duration of long term care claims is between 2.5 and 3.5 years.

5. Indexing Benefits for Inflation – In Wisconsin, there are two choices available based upon regulations established by the Wisconsin Insurance Commissioner’s office:

a. No indexing, so the benefit remains level

b. 5% compound indexing from policy inception, generally the best available inflation adjustment option in the long term care insurance industry

The cost of long term care services is reported to be increasing at approximately 7% per year for the past couple years. Many people are buying long term care insurance to protect against claims that may be incurred in 20 to 40 years.

6. Premium Discounts – There are several categories of premium discounts that vary by insurance company:

a. Spouse/partner discount: Varying levels of premium savings are available if a person does not live alone. The greatest discount is available if both spouses/partners are issued long term care insurance.

b. Preferred health discount: There is a premium savings for healthier than average insureds who do not use nicotine.

c. Small group discount: If an approved business “sponsors” this insurance and there is sufficient participation, an additional 5% discount is applicable. Participation in the plan may be optional, and premiums may be billed to the insured rather than the business.