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Insurance Needs Approach - Types of Long-Term Care Coverage

What are the types of care?
A common misperception is that long-term care means staying in a nursing home. Today, there are other care options available. Long-term care services can be divided into two types of care: home and community care and facility care.

Here are some examples of each type of care:

Home and Community Care Facility Care

Home health care
Informal (Custodial) care
Homemaker service
Hospice care
Adult day care

Residential care facilities
Nursing homes

Most LTC policies pay the insured a fixed benefit each day services are rendered, regardless of what the care costs. For example, if the fixed benefit is $150 per day and the care provider charges $140 per day, the insurance company will pay the full $140 per day.

Practice Question:
Which of the following statements about long-term care insurance policies are correct?
I. Coverage periods generally extend from two to six years, but can be lifetime
II. Long-term care policies sold today must be guaranteed renewable.
III. A long-term care policy with a long probationary period will have a lower premium than one with a shorter probationary period.
IV. Premiums for a long-term care policy are based solely on the insured's age, health and the type of benefits provided.

A. II and IV
B. I, II and III
C. IV only
D. I and III E. I, II, III and IV

Answer: B
All are correct statements except VI. Premiums can also be based on the length of coverage (five years, lifetime), amount of benefit per day, cost of living riders added to the policy, and many other factors.

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