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HS 311: Long-Term Care Insurance

HS 311 · Work through your exam, one topic at a time.

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Long-Term Care Insurance

Domain 6 tests long-term care: what triggers benefits, which levels of care are covered, and how policy features control cost.

Benefit triggers

A tax-qualified policy pays when a licensed health care practitioner certifies either (1) inability to perform at least 2 of the 6 activities of daily living - bathing, dressing, toileting, transferring, eating, continence - expected to last at least 90 days, or (2) a severe cognitive impairment (such as Alzheimer's disease) requiring substantial supervision. Cognitive impairment does not require an ADL failure.

Levels of care and settings

Skilled nursing care (daily care by licensed professionals), intermediate care (occasional skilled care), custodial care (help with ADLs - the most common need), home health care, adult day care, respite care, hospice, and assisted living. Medicare does not pay for custodial care; that is the gap private LTC insurance fills.

Policy mechanics

  • Benefit amount: a daily or monthly maximum, for example $5,000 per month.
  • Benefit period: 2, 3, or 5 years, or a lifetime/unlimited option.
  • Elimination period: days of service or calendar days before benefits begin (0–365 days).
  • Inflation protection: commonly 5% compound, which roughly doubles the benefit in about 15 years.
  • Guaranteed renewable: the insurer cannot cancel but may raise premiums by class with state approval.
  • Nonforfeiture benefit: if premiums lapse after a stated period, a reduced paid-up benefit remains.
  • Partnership programs pair a qualifying policy with Medicaid asset protection.

Worked example

Policy: $5,000 monthly maximum, 3-year benefit period, 90-day elimination period, 5% compound inflation, purchased 10 years ago.

  1. Inflated monthly maximum = $5,000 × 1.05^10 ≈ $8,144.
  2. Total pool ≈ $8,144 × 36 months ≈ $293,000.
  3. The insured must satisfy the 90-day elimination period (counted in service days if the contract says so) before the pool begins to pay.

Traps

  • Accepting a vague "needs help" statement as a trigger instead of documented ADL or cognitive loss.
  • Confusing the elimination period with the benefit period.
  • Assuming the monthly maximum is paid regardless of actual charges (reimbursement versus indemnity).
  • Citing Medicare skilled-nursing coverage (up to 100 days per benefit period, with copays after day 20) as long-term custodial care.