LTC Policy Design Considerations

Besides coverage level, a number of other policy features are important to consider before selecting a top-quality LTC policy that best meets your needs.

HIPPA tax-free limit is 2-3x the average coverage cost for LTC: The range of LTC expense varies based on where the care is received and for how long (see “LTC Facts and Economics” for a more in-depth look). With 7 out of 10 seniors expected to need some form of LTC, even healthy individuals should consider getting coverage for the average future LTC cost. But, if you have personal or family health factors that put you at a higher risk for LTC disability, and if you are financially able, then getting a bigger policy that maximizes tax-free LTC benefits may be a good option.

Joint vs. Single LTC policy: Joint policies usually have limitations that will need thorough vetting to determine if a joint policy is in fact better than obtaining two individual policies. The top-quality Joint and Single LTC policies may come from different carriers.

Indemnity policy covers home healthcare: An indemnity option pays out a set benefit amount without needing receipts. This amount may be discounted, 20% for instance, from the maximum benefit amount stipulated in the policy. However, it can be used to pay family members to provide LTC at home.

Inflation adjustment from day 1 of claim: Given that healthcare costs are increasing at twice the normal inflation rate, it is important that the benefits are inflation-adjusted by either 3% or 5% CAGR. Though this may result in a smaller initial benefit amount when someone is younger, it is more important that the benefits cover costs when you are in your 80s and more at risk for an LTC disability.

Return of Premium (ROP): The ROP feature is more for our peace of mind and rarely gets triggered. Still, if one chooses, the policy can be cancelled and the premium returned to the owner, typically after 5 years.

International benefits even if it is discounted: This is an important consideration if you have plans to retire outside the US. Either the length of care or the benefit is reduced for international coverage.

Accelerated Death Benefit (ADB) for terminal illness: If the insured is diagnosed with a terminal illness and has less than a year to live, a discounted value of the death benefit, typically 50%, should immediately be accessible.

Lifetime vs. 2-8 year benefit period: The length of care is an important consideration. Though the average stay at an LTC facility is 2-3 years, additional follow-on care may often be needed at home. Chronic conditions such as cognitive impairment (e.g., Alzheimer’s) require lifelong care. Policies should allow benefits to be taken until the total benefit pool is exhausted.

Elimination period in calendar days: A 90-day elimination period is usually required before the LTC benefits kick in. Shorter elimination periods that are measured in calendar days are preferred to service days because past LTC services rendered may not be contiguous.

Get your LTC policy in your 50s: LTC policy is an investment in managing one’s health-related financial risk. Health factors are as equally important as financial factors in qualifying for LTC coverage. Get your LTC policy while you are still healthy and eligible for coverage.

Our blog “How A LTC Policy Works” illustrates a standalone LTC policy that is designed to meet anticipated future LTC costs.

We specialize in tax-free retirement strategy and investments such as IUL, Annuity and LTC. Prefer a quick and complimentary consultation? Just email us at

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