LTC 101: Understanding the Basics of Long-term Care Coverage

LTC 101: Understanding the Basics of Long-term Care Coverage

When long-term care insurance came on the scene in the mid-1980s, the policies were comparatively simple, with only a few options. While there are lots of choices today, there are still some basics that are important to understand.

How does ltc coverage finance the care?

What LTC coverage does is create a “pool of money” or a dedicated “long-term care fund” which will be used to pay for covered care. The size of the pool or fund is one of the principle factors that determine the cost of the coverage.

How is the amount of money in the pool or fund determined?

The first step is to research the cost of long-term care in the buyer’s geographic area. In Orange County the median cost of a semi-private room in a nursing home is $247 per day or about $90,000 per year. A nursing home is the most expensive care as it covers all long-term care needs and room and board twenty-four hours-per-day, seven days- per-week. Care in an assisted living facility, adult day care, and home care are less expensive, but may not cover all the buyer’s living costs.

For our purposes here, let’s say we want the “pool” to be based on $225 per day. Next we select a “multiplier” which is loosely based on the number of days of care. Since history shows that a 4-year or 1,460 day multiplier would cover most people’s LTC needs, we’ll use that number. So, we have $225 x 1,460 for a pool of $328,500.

Does that mean the coverage only lasts 4 years?

Not necessarily. There is no time limit. It may take many more years for the pool to completely deplete. Sometimes, all or part of the money isn’t needed for LTC services. Some LTC coverage is designed with features that use the remainder of the pool for benefits such as a life insurance or for the return of the premiums paid for the coverage.

How is the money distributed from the pool?

There are two possible ways, “reimbursement” and “indemnity.” Each method requires that the insured meet the requirements for the commencement of benefits. Reimbursement means that the insurance company reimburses actual long-term care expenses. Indemnity means that the insured is sent a predetermined payment (say $5,000 per month) and the insured pays his or her own expenses. Indemnity benefits would be paid until the pool is depleted or until the insured no longer needs LTC services.

What if ltc isn’t needed right away and costs rise?

Long-term Care policies have “inflation protection” options that can be added. Inflation protection may include several optional levels. For example, generally, the highest level of protection is 5%, compounded; meaning that the pool of money is increased by 5% per year on a compounded basis. Of course the actual design and administration of inflation protection benefits varies with each long-term care insurance carrier.

Long-term care coverage, while sounding complex, is much easier to understand once one becomes familiar with its terminology. A glossary of terms is available at no cost. To receive the glossary, or if you have questions, please call or email me (my contact information is below). There is never a charge for providing information and consultation.

C. Lawrence “Larry” Thomas

C. Lawrence “Larry” Thomas began working with long-term care and Medicare programs in the mid- 1980s. He is currently associated with Insurance 101 Services to provide long- term care solutions to seniors and those approaching. Larry can be reached at (949) 374-3316 or ltinsurance@me.com.
CA Insurance License # 0C79256.

Latest News

Segerstrom Center for the Arts Announces 2018 – 2019 International Dance Series

Entertainment Sorbet Mag

Segerstrom Center for the Arts Announces 2018 – 2019  International Dance Series

Segerstrom Center for the Arts has announced its internationally and culturally rich 2018 – 2019 Dance Series, ...

The Ritz-Carlton, Laguna Niguel presents its annual summer Festival of Arts exhibit

Education Sorbet Mag

The Ritz-Carlton, Laguna Niguel presents its annual summer Festival of Arts exhibit

The Ritz-Carlton, Laguna Niguel presents its annual summer Festival of Arts exhibit featuring 13 contemporary a...

Resale Done Right at Revel Consignment

Education Jody Robinson

Resale Done Right at Revel Consignment

I love the concept of consignment - finding a true treasure for which someone else paid full retail and I get t...

THE ORANGE CATHOLIC FOUNDATION OFFERS AN OPPORTUNITY TO LEAVE A LASTING LEGACY

Education Sorbet Mag

THE ORANGE CATHOLIC FOUNDATION OFFERS AN OPPORTUNITY TO LEAVE A LASTING LEGACY

Since its first Wills and Trusts Week in the fall of 2011, the Orange Catholic Foundation has had as one of its...

Abundant Luxury at Omni La Costa

Travel Jody Robinson

Abundant Luxury at Omni La Costa

The word ‘omni’ is the root of a great many words in the English language. From Latin, it means ‘all, every, th...

Year ‘round Family Fun on Lake Tahoe’s South Shore

Travel Jody Robinson

Year ‘round  Family Fun  on Lake Tahoe’s  South Shore

All the stars were in alignment in early April. Our kids and our family friends’ children (who live in Napa) en...

DEDICATIONS AND BANNED SONGS

Entertainment Joe D

DEDICATIONS AND BANNED SONGS

Why did this music resonate with the teenagers that were a product of the 50’s? The music was theirs. DJ’s of t...

Residential Redefinition. Assisted Living Reimagined at Ivy Glenn

Business Showcase Jody Robinson

Residential  Redefinition. Assisted Living Reimagined  at Ivy Glenn

Assisted Living facilities have struggled with their reputation for a great many years. The emotional understan...

Pilates Day 2018!

Health & Wellness Align Pilates Team

Pilates Day 2018!

Sunday May 5th is International Pilates Day. Pilates Day is an annual, international community event, celebrate...

Skin Cancer + Cosmetics. Kristy Fleming, MD, FAAD

Health & Wellness Jody Robinson

Skin Cancer + Cosmetics. Kristy Fleming, MD, FAAD

It takes a trained eye to note the subtle shading needed to contour a surfboard. To taper the rails just so. To...

Beacon Carpet Cleaning. Lighting the Way to a Cleaner Space

Business Showcase Sorbet Mag

Beacon Carpet Cleaning. Lighting the Way to a Cleaner Space

When I was a child, I remember my parents moving our family into a new house, with pristine, white carpets. Bea...

Alliance Eldercare Senior Placement Service

Business Showcase Jody Robinson

Alliance Eldercare Senior Placement Service

Committed to Helping You Make Educated Choices for Your Loved One’s Care My grandmother and I used to joke wit...

The Law Firm of Allen, Flatt, Ballidis & Leslie: Bringing Justice Home

Business Showcase Sorbet Mag

The Law Firm  of Allen, Flatt, Ballidis & Leslie: Bringing Justice Home

My sister was hit by a snowboarder when she was sixteen. On skis, just a couple of turns from the bottom of the...

Ryan Furlet: South County’s K-9 Guru

Business Showcase Jody Robinson

Ryan Furlet: South County’s K-9 Guru

There is something powerful about true, deep calm. The spread of quiet. Perhaps the draw of it is why so many s...

Capital Bank Brings Innovative Financial Solutions to Orange County

Finance Sorbet Mag

Capital Bank Brings Innovative Financial Solutions to Orange County

At Capital Bank, we are dedicated to collaborating with clients to provide financial solutions tailor...

Taking a Vow to Save

Finance Ann Laurence

Taking a Vow to Save

My father does not like debt. My father does not like debt in the way that most people don’t like spiders, or b...

Explore Live Music. Enjoy Life.

Entertainment Sorbet Mag

Explore Live Music. Enjoy Life.

Sean Jones: Inspired by Miles Davis’s Jazz Friday, April 6, 2018, 8 PM Music and spirituality have always int...

Destination Dining. RAYA at The Ritz-Carlton, Laguna Niguel

Dining Out Jody Robinson

Destination Dining. RAYA  at The Ritz-Carlton, Laguna Niguel

Dining at the Ritz-Carlton is itself a worthy reason to pay a visit any day of the week and enjoy a different e...

Urinary Tract Infections and Absorbent Pads… Is There a Link?

Health & Wellness Robert G. Pugach

Urinary Tract Infections and Absorbent Pads… Is There a Link?

Did you know that more than 8 million doctor’s office visits per year in the US are for Urinary Tract Infection...

Pets of the Month

Home Life Jody Robinson

Pets of the Month

Yum Yum is an eight year old kitty who is ready for a new start. Calm and mild-mannered, she enjoys sunbathin...

Prev Next