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Long Term Care Insurance - How does a Traditional LTCI policy work?

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Tommy Groover

Long Term Care & Life Insurance Professional Agent

Long Term Care Insurance - How does a Traditional LTCI policy work?

Traditional long-term care insurance is a type of insurance that helps pay for long-term care services when you need them. Long-term care services include assistance with daily activities such as bathing, dressing, eating, and transferring, or care for cognitive impairments such as Alzheimer's disease¹².


Traditional long-term care insurance works like this:


- You buy a policy from an insurance company and pay premiums, usually for as long as the policy is in effect³⁵.

- You choose the benefit options and features that suit your needs and budget. Some of the options include the benefit amount, the benefit period, the inflation protection, the waiting period, and the type of care covered¹²⁴.

- You become eligible for benefits when you meet certain criteria, such as needing help with at least two activities of daily living or having a severe cognitive impairment. This is called a benefit trigger¹².

- You submit a claim to the insurance company when you need long-term care services. The insurance company will review your claim and determine if you qualify for benefits¹².

- You receive benefits from the insurance company based on the method of payment specified in your policy. There are three methods of payment: expense-incurred, indemnity, or cash². Expense-incurred pays the lesser of either the actual expense or the policy's daily benefit amount. Indemnity pays solely based on the policy's daily benefit amount, regardless of the actual expense. Cash pays a fixed amount per day that you can use for any purpose.

- You continue to receive benefits until you no longer need long-term care services, you reach the maximum benefit limit, or your policy expires¹².


Traditional long-term care insurance can help you cover the costs of long-term care and protect your assets from being depleted. However, it can also be expensive and difficult to qualify for. You may face premium increases over time or risk losing your coverage if you stop paying premiums. You may also never use your benefits if you never need long-term care services or die before using them²³⁵.


Benefit Options to consider:


A standard long-term care insurance policy has the following benefits, features, elimination periods and riders:


Payment of service:

- Benefits amounts: - Daily, Monthy

- Benefit period: 2,3,4,5 years, etc.


Type of care covered: 


- Home health care, adult day care, assisted living facility, nursing home, hospice care, or informal care. 

- Method of payment:  Reinbursement, indemnity, or cash. 

- Elimination periods: 0, 30,60, 90 Days. 


Riders: 

- Shared care rider: 

- Nonforfeiture rider: 

- Return of premium rider: 

- Waiver of premium rider: 

- Waiver of elimination period rider: 


(1) What is Traditional Long-Term Care Insurance?. https://www.steadfastagents.com/what-is-traditional-long-term-care-insurance/.

(2) Long-Term Care Insurance Explained - NerdWallet. https://www.nerdwallet.com/article/insurance/long-term-care-insurance.

(3) How To Find The Best Long-Term Care Insurance - Forbes. https://www.forbes.com/advisor/life-insurance/best-long-term-care-insurance/.

(4) Making Sense of Your Long-Term Insurance Options - AARP. https://www.aarp.org/caregiving/financial-legal/info-2021/understanding-long-term-care-insurance.html.

(5) Traditional Long-Term Care Insurance | New York Life. https://www.newyorklife.com/products/long-term-care-insurance/traditional.

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Long Term Care Insurance - How does a Traditional LTCI policy work?

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