Long-Term Care Insurance: How It Works

Benefit Triggers: When Coverage Begins

Long-term care insurance benefits are triggered when the insured person meets specific criteria defined in the policy. Most policies use one or both of these triggers:

• ADL trigger: the person cannot perform a specified number of activities of daily living (ADLs) without substantial assistance — typically 2 of 6 ADLs (bathing, dressing, eating, toileting, transferring, continence)
• Cognitive impairment trigger: the person has a severe cognitive impairment (such as Alzheimer's disease) that requires substantial supervision to protect their health or safety

The policy must specify how these triggers are assessed and who makes the determination. Some policies require assessment by the insurer's own evaluator; others accept a physician's certification.

Elimination Period (Waiting Period)

The elimination period is the number of days the insured must pay for care out of pocket before the insurance begins paying. Common elimination periods are 30, 60 or 90 days. A longer elimination period typically means a lower premium.

Understand how the elimination period is counted in your policy — some policies count only days when care is actually received; others count calendar days.

Daily and Monthly Benefit Amounts

Policies specify a maximum daily or monthly benefit amount — the most the policy will pay per day or month for covered care. This amount should be compared to actual care costs in your area.

• Daily benefit: the maximum the policy pays per day of covered care
• Monthly benefit: some newer policies use a monthly pool rather than a daily limit, providing more flexibility
• Benefit period: the maximum length of time benefits will be paid — common periods are 2, 3, 5 years or lifetime
• Maximum lifetime benefit: the total amount the policy will pay over its lifetime

Inflation Protection

Long-term care costs have historically increased faster than general inflation. Without inflation protection, a policy purchased today may cover only a fraction of actual costs when benefits are needed years later.

• Compound inflation protection: benefit amounts increase by a fixed percentage (e.g., 3% or 5%) compounded annually — the most valuable but most expensive option
• Simple inflation protection: benefit amounts increase by a fixed dollar amount each year
• Future purchase option: allows the insured to purchase additional coverage at specified intervals without new medical underwriting
• No inflation protection: the benefit amount remains fixed — generally not recommended for younger purchasers

Covered Care Settings

Verify that the policy covers the care settings you are most likely to use. Most comprehensive policies cover:

• Nursing home care
• Assisted living
• Memory care
• In-home care (personal care and skilled care)
• Adult day services
• Hospice care

Some older policies cover only nursing home care. If you have an existing policy, review it carefully to understand what settings are covered.

Questions to Ask an Insurer or Agent

• What are the exact benefit triggers, and how are they assessed?
• What is the elimination period, and how are days counted?
• What is the daily or monthly benefit amount, and what is the maximum lifetime benefit?
• What inflation protection options are available?
• What care settings are covered?
• What is the insurer's history of premium rate increases for this type of policy?
• Is the insurer financially stable? (Check ratings from A.M. Best, Moody's or S&P)
• What is the claims process, and how long does it typically take to begin receiving benefits?
• Are there any exclusions for pre-existing conditions?