The Benefits And Limitations Of Long-Term Care Insurance

By Rick Law, Elder Law and Estate Planning Attorney In Western Suburban Aurora, IL

When planning for the unexpected, long-term care insurance should not be overlooked.  This type of protection should be considered not only for its ability to pay for care services, but more so to protect and preserve assets.  Long-term care insurance protects assets, avoids dependency on others and retains the insured person’s freedom of choice. It is something that everyone needs to consider in the overall asset protection plan.

The benefits of owning a long-term care insurance policy include:

• Asset and estate preservation

• Independence and integrity

• Flexibility and choice

• Easier access to care

Long-term care insurance can mean the difference between choosing the type of care that you or your loved one desires and deserves, or being forced to spend down assets in order to qualify for Medicaid.  Over the years there have been many changes and upgrades to long-term care insurance policies. However, at its most basic level, the design of a long-term care plan follows several parameters, and these factors also help to determine the premium cost of the policy. These factors include:

• Applicant’s age – Long-term care insurance policies are priced based on the applicant’s age. Sometimes this can be the actual age that the applicant is on the day that they complete the policy application for coverage, while other policies consider the applicant’s age to be whatever their age is on their closest birthday.

• Dollar amount of coverage – Most long-term care insurance policies are built around a daily dollar amount of coverage for care. This amount can be determined based on the applicant’s income and expenses, as well as the approximate cost of care. It is important to determine how much income that the applicant has coming in, as well as how much of that income he or she plans to put toward the actual daily expenses for the care that they receive. As an example, if the average cost of care in a skilled nursing facility in an applicant’s area is $200 per day, then the applicant may decide to insure for the entire amount of $200 per day, or they may decide to only insure for $100 per day of coverage and pay the other $100 per day out-of-pocket. Insuring for a lower daily dollar amount will keep the policy premium lower.

• Inflation Protection – In addition to the daily dollar amount of coverage, the applicant also has the choice of leaving the dollar amount steady or increasing it each year. There are two choices for increasing the daily dollar amount of care. These are equal benefit increases or compound benefit increases. Both are typically increased in increments of 5 percent. What this means is that equal benefit increases will allow the original daily dollar amount chosen to increase by 5 percent of that amount each year. For example, if an applicant chooses a daily dollar amount of $100 per day, and they choose to have equal benefit increases, then their daily dollar amount of coverage will increase by $5 each year ($100 x 5 percent). The compound benefit increase means that the daily dollar amount will be compounded by 5 percent each year. In this case, each year the applicant’s coverage will increase by 5 percent over the amount from the prior year. This option allows an applicant’s daily amount to increase to larger amounts over the years. Usually the amount of coverage will continue to increase even after the insured person begins receiving benefits from the policy.

• Elimanation Period – Another pricing factor in long-term care insurance policies has to do with the elimination period. This is the number of days that a policy owner must fund the care cost to him or herself before the insurance benefits begin paying for their care. This can be compared to the deductible in an auto insurance policy. There is not necessarily any set formula for determining the proper elimination period. It really depends upon how much of the care costs that the policy owner wishes to fund before the insurance benefits begin to take effect. Some policies offer a 0-day elimination period, meaning that the insurance benefits will start on the first day of care that is received. Other choices can include 30-days, 60-days, 90-days, 100-days or even 365-days.

• Duration of Benefits – Another factor in designing a long-term care plan for Illinois seniors is the duration of benefits. Most long-term care policies offer a lifetime benefit option. This means that benefits will continue literally through the duration of the policy owner’s life. An applicant can also choose a certain number of years for their care coverage. Benefit duration options include one year, two years, three years, five years, six years or 10 years. Since one of the primary purposes of long-term care insurance is to protect against catastrophic illness, longer benefit periods should be considered. However, the amount of other income that the policy holder has to use toward paying for care will also factor into this determination.

Too many Chicagoland families needlessly lose everything they have.  Don’t let that be you.  If you need help building a fortress around your estate to protect it from creditors, predators, and the cost of chronic disease, give our office a call at 800-310-3100.  Your first consultation is absolutely free.  We’ll let you know what steps you need to take, right now, to protect yourself and your family.  Call now, because when you’re out of money, you’re out of options!


Rick L. Law, Attorney and Estate Planner for Retirees.

Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine,, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future.  Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care.  Call 800-310-3100 for your free consultation now!


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