Activities of Daily Living (ADL's)

These are the basic activities that we all tend to take for granted. These "learned" activities are the ones, later in life, we need help with either due to illness, accident or the impact of aging. A Long Term Care Insurance policy generally requires your healthcare professional to certify you need help or assistance with at least two of the six ADL's. The six ADL's are the following: bathing, dressing, transferring, eating, toileting, and continence. Persons needing help performing ADL's are further classified as requiring "hands-on assistance" or "standby assistance".

Adult Day Care Facility

A facility that is:

There are two general types of adult day care programs. One is based on a medical model and the other on a social model. The medical model provides comprehensive medical, therapeutic, and rehabilitation day treatment. The social model offers supervised activities, peer support, companionship, and recreation. Both models assist older adults and those with chronic conditions to remain as independent as possible, for as long as possible.

Programs organized along the medical model lines are often called adult day health care to distinguish them from social programs. Adult day health care programs offer health services such as physician visits, nursing care, and podiatry, as well as rehabilitation services such as physical, occupational, and speech therapy in a secure environment. This model of adult day care is offered to persons with a variety of chronic medical conditions including the following:

• adults with Alzheimer's disease, other forms of dementia, or depression
• persons recovering from stroke or head or spinal cord injuries
• people with chronic conditions such as diabetes or cardiovascular disease
• adults with developmental disabilities such as Down syndrome
• adults suffering from mental illnesses
• weak or frail older adults requiring nursing care or assistance with daily living activities

The social model of adult day care emphasizes supervised group activities such as crafts, gardening, music, and exercise. Participants in this model may require some assistance with the activities of daily living (e.g., eating, bathing, dressing, etc.) but they generally do not require skilled nursing care. Like adult day health care facilities, these social programs generally provide transportation and a midday meal for participants, as well as caregiver support groups, information and referral services, and community outreach programs.

Most insurance companies who offer Long Term Care Insurance will pay benefits toward adult daycare services.

Although the participants of adult day care are adults who attend the programs daily or several times each week, adult day care also meets the needs of families and other caregivers. Before women entered the workforce, they were available to care for relatives at home. Today, adult day care provides a secure, alternative source of care for women who work outside the home. It also offers respite, or much needed breaks, for caregivers. Older adults caring for spouses, or children caring for aging parents find that adult day care helps ease the burden of caring for ill, confused, or disabled family members.

Ancillary services

In a long term care policy it is coverage for items like physical, occupational, speech and respiratory therapies, wound care, medication management, supplies and services for continence care support and other similar care-related services and/or supplies that support a person's activities of daily living.

Assisted Living Facility

A type of Long-Term care facility for people who are able to get around on their own but who may need help with some activities of daily living or simply prefer the convenience of having their meals in a central cafeteria and having nursing staff on call. This residential living arrangement provides personal care and health services for people who need assistance with activities of daily living. These facilities can range from small homes to large apartment complexes. They also vary in the levels of care and services that can be provided. Assisted living facilities are much less institutional and provide a way for people to retain a relatively independent lifestyle who do not need the level of care provided by nursing homes. Most LTC policies provide benefits for assisted living.

Alternate Care Benefit

In a long term care policy the insurance company, under this provision, will consider paying for treatments, services, and supplies not specifically listed in the policy as long as it benefits care and can be cost effective for the insurance company. Generally needs to be in a plan of care recommended by a health care professional. The provision is placed in many long term care policies to cover items in the future that may benefit a person's care and still be cost effective. An insurance company will never force an insured to use an alternative type of care.

Bathing

One of the Activities of Daily Living used to trigger benefits in a Long-Term care insurance policy. It is defined as washing oneself by sponge bath, or in either a tub or shower, including the task of getting into or out of the tub or shower. (See also Activities of Daily Living.)

Bed Reservations

If you are in a nursing home and need to go to a hospital, some policies will pay to reserve your nursing home bed so you can return when your hospital stay is over. There is a limit on how many days your bed will be reserved depending on the company. Some companies allow payment for bed reservation for any reason. This is important since once you find a facility you and your family are happy with you don't want to lose it if you have to leave temporarily like go to a hospital. Sometimes you can get back into the same facility but not the same room with a view you enjoy. In either case, having this in a long term care policy is very valuable.

Benefit Period

The minimum period of time a long term care insurance policy will pay benefits. Some companies use 'benefit period' to create a pool of money and the pool of money can provide benefits well beyond the 'benefit period'. For example, you may have an initial $150,000 pool of benefits with $3500 a month available (not counting any inflation you may have in a policy). If you used the maximum available every month it would last a little over 3 years. However, most long term care insurance claims start with care at home. SO this pool could last 4, 5 even 6 years or more depending on how the benefits are used.

With some companies you would select a monthly benefit and a benefit period to create the pool. So if you selected $3500 a month and a 3 year benefit period, it would create an initial pool of money worth $126,000 (plus any inflation benefit). Again, the pool can last much longer than 3 years.

Benefit Triggers

These are the conditions a person must meet before a long term care policy pays benefits. The common triggers for tax-qualified long term care policies are:

• 1. You require help with a specified number of ADL limitations (usually 2) OR
• 2. You require supervision due to a cognitive impairment

Case Management/Care Management

Some policies offer case management if you need care. A case manager is chosen either by you, your family, your doctor, or by the insurance company. The manager evaluates your need for care and determines the best type of care for your situation. Since managers know what care resources are available, and the needs of the person requiring the care they can make the best recommendations based on both your needs and preferences.

They continue to review your situation on an on-going basis to make sure the quality of care remains appropriate. In addition, many times they are able to obtain provider discounts. Some insurance companies offer this benefit to uninsured spouses or family members.

Cash Benefit

Policies paying a Cash Benefit pay a fixed amount while the insured qualifies as disabled, regardless of whether the insured actually receives care. The fixed amount may differ depending on whether the insured is in a facility or at home. See also Indemnity.

Chronic Care

Refers to care and services that help achieve functional independence for those with continuing and long term health problems as opposed to "acute" care which refers to short term care of a severe illness. Chronic conditions generally have no specific cure and require care over a protracted period of time. Chronic care is often used interchangeably with Long Term Care in the medical community.

Chronically Ill

Tax-qualified LTC policies require that an insured be certified as "Chronically ill" by a licensed health care practitioner. This means the insured is unable to perform without substantial assistance (actual hands-on or stand-by) at least 2 activities of daily living for a period of at least 90 days or require supervision due to a cognitive impairment. The 90-day requirement means the health care professional expects your need for care for at least that long.

Class

This is a group of people in a long term care insurance policy having the same application date, policy form, sex, issue age, issue year, rate classification and state of issue in common. It is used for any possible rate increase as any approved increase by a state's Department of Insurance must be by "class". In other words, an insurance company may not increase a premium to just one person or small group of persons, only a class of people.

Co-Insurance

This is the concept of sharing the cost of care with an insurance company, generally with the insurance company paying the majority but not all the costs in order to keep a premium much lower. Co-insurance refers to the amount that the insured must pay out-of-pocket to make-up the difference between their actual costs and the amount the policy covers. The greater the amount the insured is willing and able to "co-insure" the lower the policy benefits must be and therefore policy premiums.

Cognitive Impairment

The deterioration or loss in your mental capacity which requires continual supervision to protect yourself or others. It refers to your impairment in the following areas:

• 1. your short term or long term memory
• 2. your orientation as to person (who you are), place (where you are), time (day, date and year), and
• 3. your deductive or abstract reasoning.

Comprehensive Policy

Long Term Care insurance policy that covers care in multiple settings including facility and in-home care. Most long term care policies today are comprehensive and cover all areas of care in all types of settings.

Compound Inflation

A rider on a long term care insurance policy where the benefits increase by a rate compounded every year. For example, if your Maximum Daily Benefit (MDB) was $100 and you had a 5% compound inflation rider, the Maximum Daily Benefit would increase by 5% per year. Therefore in year two it would by $105, but in year three $110.25, in year four $115.76 etc. The difference between a compound and simple inflation rider is not significant in earlier years, but becomes greater as time goes on. The type of inflation options may determine if a long term care insurance policy qualifies for "partnership" certification.

Continence

The ability to maintain control of bowel and bladder function; or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag. It is one of the Activities of Daily Living used to trigger benefits in a Long-Term care insurance policy.

Contingent Nonforfeiture

The Contingent Nonforfeiture Benefit is the opportunity in all tax-qualified long term care policies to provide the policy holder options in the event the insurance company gets approved a rate increase of over a certain amount as listed in the policy. The policy holder may reduce coverage so that required premium payments are not increased or to convert to a paid-up status if there is a substantial premium increase. The offer to reduce coverage or to convert to a paid-up status does not require additional underwriting. While it is not easy for an insurance company to raise premiums on Long Term Care Insurance policies, this provision provides additional consumer protection.

Convalescent Care Facility

This is an institution devoted to providing medical, nursing, or custodial care for an individual over a prolonged period, such as during the course of a chronic disease or the rehabilitation phase after an acute illness.

Coordination of Benefits

Coordination of benefits means a long term care policy will pay benefits only after any other insurance policy or government agency has made payment. It will not make payments on top of benefits from some other policy.

Criminalization

Under the provisions of the Health Insurance Portability and Accountability Act which became law January 1, 1997, persons who knowingly and willfully dispose of assets in order to become eligible for Medicaid payment of long term care expenses are subject to criminal penalties, if doing so results in a period of ineligibility for Medicaid benefits. This was modified by the Deficit Reduction Act (DRA) of 2005, the period of ineligibility is now 5 years.

Chronically Ill

A person is generally defined as Chronically Ill in a long term care insurance policy when they have been certified by a Licensed Health Care Practitioner as being unable to perform, without Substantial Assistance from another person, at least two Activities of Daily Living for a period that is expected to last at least ninety (90) days due to a loss of functional capacity; or requires Substantial Supervision to protect a person from threats to health and safety due to a Severe Cognitive Impairment. Substantial Assistance generally means either Hands-on Assistance or Standby Assistance.

Custodial Care

Custodial care refers to the type of care most people will need when they need long term health care services. This is care that helps a person with the activities of daily living. It may be provided by people with little or no medical training. Custodial care may involve preparation of meals, help with taking medicines, and other routine activities. Custodial care can be given in assisted living facilities, nursing homes, adult day centers, or at home. Generally, LTC policies pay for custodial care in any setting if you meet the trigger for benefits.

Daily Benefit

The amount a policy will pay for a day of care. Often people choose a monthly benefit since the out-of-pocket expense is less due to how home care is delivered.

Deficit Reduction Act (DRA)

This is a law passed in 2005 that significantly tightens the eligibility for Medicaid payment of Long-Term care services. The law changed the look-back period for asset transfers from 3 years to 5 years. It also provided for Qualified State LTC Partnerships, which will permit States with approved State plan amendments (SPA) to exclude from estate recovery the amount of LTC benefits paid under a qualified LTC insurance policy. For States that elect this option, the State plan must provide that, in determining eligibility for Medicaid, an amount equal to the benefits paid under a qualified LTC policy is disregarded. The State must also allow, in the determination of the amount to be recovered from a beneficiary's estate, for the same amount to be disregarded.

The intent of the law was to eliminate or greatly reduce the use of asset transfers such as gifts to children, as a way to become eligible for Medicaid benefits, and to encourage the use of private Long-Term care insurance instead of Medicaid to pay for Long-Term care services.

Dementia

Deterioration of intellectual function due to a disorder of the brain.

Elimination Period

The time between when you begin receiving care and the policy begins paying benefits in a long term care insurance policy. An elimination or waiting period is like a "deductible" in health or car insurance; it's the part you pay before the insurer starts to pay. Generally, it is once-in-a lifetime period, not once per occurrence.

Exceptions/Exclusions

All policies specify certain situations in which they will not pay benefits. These usually include care: required by war, for intentionally self-inflicted injury, paid by the government, for which no charge is made in the absence of insurance, due to alcoholism or drug addiction. Every insurance company has its own exclusions but they tend to be very limited and well defined.

Facility Only Policy

Policy where benefits are only covered in a long term care policy if the policyholder is receiving care in a licensed Long Term Care facility, e.g. a Nursing Home or Assisted Living Facility.

Free-Look Period

Most states allow you to "refuse" a policy within 30 days of delivery if you change your mind after buying it, and to get your money back.

Future Purchased Option (FPO)

A form of inflation protection in a long term care insurance policy where the insured has the right to increase benefits periodically (e.g., every 3 years) to reflect increases in the cost of care. These increases can be elected without providing evidence of insurability as long as the insured is not receiving benefits at the time. In some plans if the insured declines a number of successive offers of additional coverage, no further chances to increase are available. If additional coverage is purchased, the additional premium is based on attained age, i.e. the insureds then-current age. This is also known as Guaranteed Purchase Option (GPO). At most ages, this type of inflation option would not be partnership qualified.

Guaranteed Renewable

All tax-qualified Long term care insurance policies are 'guaranteed renewable' for life. The insurance company cannot cancel the policy for any reason except for non-payment of premium.

Hands-on Assistance

This is the physical assistance of another person, without which the person would be unable to perform an ADL.

HIPAA

The Health Insurance Portability and Accountability Act of 1996 became law on January 1, 1997. The Act, in part, specifies requirements that a Long-Term care insurance policy must meet in order that premiums paid may be deducted as medical expenses, and benefits paid not be considered taxable income.

Home Health Aide

A health worker, usually employed by a Home Health Agency, other than a doctor, nurse, or therapist, who provides help at home with activities of daily living, and in some cases homemaker or companionship services.

Home Health Care

This is care provided by a state licensed agency or licensed health professional and includes services provided by a nurse, home health aide, nutritionist, or occupational, speech, respiratory, or physical therapist. Generally in a long term care policy, it will not usually cover services provided by members of your family unless they are doing their normal job and qualified to do so. For example, if the insured's daughter is a physical therapist and you require one, they would be doing their normal job and could be paid by the insurance company.

Homemaker Service

This provides additional services in a long term care policy for a person to provide laundry, housekeeping, transportation and shopping assistance when provided in conjunction with other homecare services.

Hospice Care

Short-term, supportive care for the terminally ill which focuses on pain management, emotional, physical, and spiritual support for the patient and family. It can be provided at home, in a hospital, nursing home, or a hospice facility. A person is considered terminally ill when their life expectancy is six months or less. A limited amount of Hospice is usually paid by health insurance and Medicare. A long term care policy will generally pay for Hospice as well once you go over your allotted number of days that are paid by health insurance/Medicare.

Incontinence

Generally known as "Continence" which is the ability to maintain control of bowel and bladder function; or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag). It is one of the Activities of Daily Living used to trigger benefits in a Long-Term care insurance policy.

Instrumental Activities of Daily Living (IADL's)

These are activities such as using a telephone, shopping, traveling outside the home, taking medications, managing money, preparing meals, doing housekeeping and laundry. Persons unable to perform one or more of these without assistance are said to have an IADL limitation. These limitations may be early warnings of disability requiring Long-Term care, and evidence of IADL limitations may be used in the underwriting process to deny insurance to an applicant.

Indemnity Benefit

An indemnity benefit is a fixed amount paid when care is received, regardless of the cost of care. A policy with a $100 a day indemnity benefit will pay $100 a day for each day you qualify for care regardless of the expense incurred. Indemnity benefits require that care be received. See also Cash Benefit.

Inflation Protection

Since the cost of care increases over time, long term care insurance policies provide Inflation Protection or Benefit Increase Options that increase the maximum monthly or daily benefit and the total lifetime benefit pool each year. Usually the buyer can choose between Simple and Compound increases. Simple increases add the same dollar amount to the monthly or daily benefit each year. Compound inflation protection increases the benefit by a percentage of the current benefit. Since the cost of care increases has a compound effect, compound protection is generally more likely to keep up with the cost of care. Partnership rules require compound inflation at most ages.

Future Purchase Options OR Guaranteed Purchase Options allow the insured to increase the benefit in future years for an additional premium.

Informal Care

This is care provided by family or friends. Some LTC policies provide benefits for informal care. Whether benefits are available may depend on the relationship of the caregiver to the insured, and on whether the caregiver lives with the insured.

Instrumental Activities of Daily Living (iADL)

Skills necessary to live independently but not necessary for fundamental functioning. IADLs for instance would include shopping, preparing meals, taking medications, paying bills etc. Inability to complete Instrumental Activities of Daily Living is not a trigger to start receiving benefits under a Long Term Care insurance policy. However, many policies will cover these services for someone who is eligible for benefits due to inability to perform a specified number of the Activities of Daily Living.

Intermediate Nursing Care

This is a health facility that provides medically related services to persons with a variety of physical or emotional conditions requiring institutional facilities but without the degree of care provided by a hospital or skilled nursing facility. This is care for stable conditions requiring daily but not 24-hour nursing supervision. The care is ordered by a doctor and supervised by registered nurses. Intermediate care is less intensive than skilled care, and usually needed for a longer period of time than skilled care. Virtually all LTC policies pay for intermediate care in an approved facility or sometime in one's home.

International Benefits

Benefits for covered services in a long term care insurance policy that are received outside the United States. Some policies have international benefits included others do not.

Lapse

Termination of a long term care insurance policy due to the policyholder's failure to pay the premium. Many policies have protections against unintentional lapses.

Lapse Protection

Policyholder's on some long term care insurance policies can pay past-due premiums and reinstate their policies up to a period of time after they have lapsed the policy if the failure to pay was the result of cognitive or functional impairment. In some cases an insurance company will notify a third party of your choosing to be contacted if your premium bill goes past due.

Lifetime Limits

Most insurance companies set a limit on the amount of benefits that a long term care policy will pay. These limits are set in terms of either years or dollars, but not both. You will usually be given a choice of lifetime limits. These limits increase with any inflation factor that the policy holder has selected. Most policies are "pool of money" products and not time-period limits, which means benefits are not "use it or lose it".

Lifetime Maximum Benefit

The maximum amount a long term care insurance company will pay over the life of a policy. Generally, this is a dollar amount which can grow with inflation. Some policies use a "dates of service" or "period of time" to determine the maximum benefit.

Limited Payment Options

A premium payment option some long term care policies offer in which the person pays premiums for a set time period, most commonly for 10 years.

Long-Term Care (LTC)

This refers to the type of care that is needed due to illness, accident or the impact of aging that goes beyond 90 days. Care can be provided in a number of settings like one's own home, adult daycare, assisted living, memory care and nursing homes.

Look-Back Period For Medicaid/MediCal/MassHealth

In order to qualify for Long Term Care benefits under Medicaid in the past many people tried to "give away" money to children or transfer assets to a "safe" financial vehicle. In response, federal law requires Medicaid will now "look-back" to any asset transfers you have made in the 5 years before applying for Medicaid benefits. Any transfers made during this period can be counted as part of your assets for the purposes of determining Medicaid eligibility and can result in an "exclusionary" period before eligibility can be restored.

Medicaid (MediCal in California – MassHealth in Massachusetts)

This is the joint federal and state government program to pay medical costs for the poor. Medicaid will pay nursing home and some home care costs if you are disabled, provided that your financial assets and monthly income are below certain allowed levels. If your assets are above the allowed level you will have to "spend down" assets to the allowed level before Medicaid will pay for your care. Generally, those with income and assets to protect will purchase long term care insurance. Partnership plans provide for "asset disregard". So in the event you use all the benefits of an approved partnership long term care insurance policy, you can legally shelter part of your estate based on the value of the benefits paid out and still access Medicaid benefits. This provides an extra level of protection in the event a person has a much more catastrophic long term care event.

Medically Necessary Care

This is the reasonable and appropriate diagnosis, treatment, and follow-up care (including supplies, appliances, and devices) as determined and prescribed by qualified appropriate health care providers in treating any condition, illness, disease, or injury. In a long term care insurance policy, it will pay for either medically necessary skilled services or custodial care.

Medicare

The federal government program to provide health insurance for people generally age 65 and over. This is a health insurance program which generally will pay only very limited benefits for long term care. Medicare will only pay for SKILLED CARE and only under certain conditions. These conditions include the person must be improving and must have spent time in a hospital prior to requiring care.

Medicare has deductibles for all types of care and most consumers purchase supplement policies when they become 65. These Medicare Supplement (Medigap) policies will pay the copayment for you.

Medicare will pay for limited amounts of home health care if you are receiving skilled or rehabilitative care, but not for "maintenance" care or help with activities of daily living. Neither Medicare nor Medigap pays for this custodial care, which is the most common and costly form of Long-Term care.

Medigap

Medigap or Medicare Supplement policies are private insurance policies that pay for care that is approved but not paid by Medicare. Typically Medigap policies pay part or all of the coinsurance and deductibles associated with Medicare coverage. Medigap policies will not pay for services not covered by Medicare.

Mental and Nervous Disorders

Refers to a mental or emotional disease or disorder of any kind that does not have an organic origin. Both Alzheimer's and senile dementia are considered organic in origin: most insurance companies cover these in a long term care policy and it should say clearly that "Alzheimer's Disease, senile dementia and other organic" brain disorders are covered by the policy.

Some insurance policies will not cover "nonorganic" mental and nervous disorders and disorders due to alcohol or drug related problems.

Nonforfeiture

This is a rider on a long term care insurance policy that says if you stop paying the premium on a policy (lapse), it will provide a residual benefit to the policy holder. Often this is a paid-up policy providing your regular benefit for a shortened period of time. Another form of Nonforfeiture is a return of some part of the money you have paid, called "return of premium" (see Return of Premium). The amount of nonforfeiture benefit depends on how long you have held and paid premiums on the policy. Contingent Nonforfeiture is a built in feature giving the insured options in the event of a premium increase. NAIC Model Regulations require this on all policies.

Partnership Policies

The LTCI Partnership program originated in the 1980's and at that time was implemented in 4 states: New York, California, Connecticut and Indiana. The partners were the insurance companies and the states and the state Medicaid departments. Policies that met the requirements of one of these states allowed buyers to shelter assets from Medicaid (asset disregard), in case they exhausted their long term care insurance benefits and then became Medicaid beneficiaries. Two forms of asset sheltering are used:

• 1. Dollar for Dollar allows insured's to keep assets equal to the total dollar benefit paid by the policy they purchased, rather than having to spend down to $2,000 (in most states) in order to become Medicaid eligible.
• 2. Total asset protection allows insured's to keep all their assets if they buy a qualifying policy.

Neither choice allows the insured to shelter income from assets, which must be used to pay for long term care expenses, subject to certain Medicaid exclusions. The OBRA 1993 Federal legislation eliminated the Medicaid waiver, stopping any additional states from developing Partnership plans. The Deficit Reduction Act (DRA) of 2005 ended the restriction on Medicaid waivers and allowed states to again develop Partnership plans allowing dollar for dollar sheltering of assets. Most states have active partnership programs in place. Qualified plans must meet Federal standards including compliance with the NAIC 2000 Model Act, requirement for inflation protection, and a requirement that policies be Tax Qualified. The inflation protection requirements for new Partnership plans are:

• 1. Under age 61 – Compound inflation, percentage not specified;
• 2. 61 to 75 – Some form of inflation protection;
• 3. Over 75 – Inflation protection must be offered but need not be purchased.

Personal Care

This is non-medical care and assistance needed to help a person perform activities of daily living and/or supervision and assistance for someone suffering from a severe cognitive impairment. Most health insurance plans do not cover custodial or personal care but are limited to acute or rehabilitative skilled-care. Long Term Care insurance plans were therefore designed to cover these services.

Plan Of Care

A documented, individualized plan of Long Term Care services prepared by a Licensed Health Care Practitioner (LHCP). Typically a Plan of Care would include the types and frequency of care needed and whether the care was to be provided by family care-givers or through formal paid care providers. If formal care is required the care plan should include a list of potential providers including whatever community services are available in the area.

Pre-existing Conditions

Any illness or disorder for which you received treatment, or a reasonable person would be expected to receive treatment before a policy became effective. Generally there are no pre-existing condition limitations on long term care policies if an application is approved.

Rate Increase

Rate increases on an existing long term care insurance policy may be sought by an insurance company only if they prove a substantial need based on actuarial reasons and impacting a "class" of individuals. They may never increase a premium to just one policy holder due to changes in health or claim's status.

Reimbursement

Reimbursement is the standard way that policies pay for Long-Term care. The insured or a care provider submits a claim for the charges for the care delivered, and the claim is paid up to the daily or monthly maximum specified in the policy. See also Indemnity and Cash Benefit.

Respite Care

Respite care is a paid caregiver provided to give relief to the person who normally cares for you without charge at home. Most long term care policies pay for respite care, usually limited by a certain number of days in a year.

Restoration of Benefits

A long term care policy may reinstate benefits you have used, after you have not needed care for a prescribed period, usually 180 days.

Return of Premium

Some policies offer riders that return some or all of the premiums you have paid at your death. The amount they give back is often based on the total amount of premium you have paid in; minus any claims they have paid. The amount returned may be a percentage of the net amount you have paid, and the percentage may be higher the longer you have held the policy. Return of Premium is almost always an optional rider. Some companies offer a return of premium benefit if a person dies prior to age 65.

Shared Care

Shared care is typically a popular rider in a long term care policy available when spouses or domestic partners both buy policies with identical benefits. With this option, either partner can use the unused benefits of the other partner. Generally, when one partner/spouse passes, the premium disappears and any unused benefit goes to the other spouse/partner. The surviving spouse/partner's premium generally is reduced by the cost of the rider which attached the two policies together.

Severe Cognitive Impairment

This is a loss or deterioration in mental capacity that is comparable to Alzheimer's Disease and similar forms of irreversible dementia, and is documented by clinical evidence and standardized tests of memory, orientation as to people, places, and time; and deductive or abstract reasoning. Tax-qualified policies must require that cognitive impairment be "severe" in accord with this definition.

Simple Inflation

A rider on a long term care policy where the benefit increases by a fixed amount per year. For example if your Maximum Daily Benefit (MDB) was $100 and you had a 5% simple inflation rider, the Maximum Daily Benefit would increase by $5.00 per year. Therefore in year two it would by $105, in year three $110, in year four $115 etc. The difference between a compound and simple inflation rider is not significant in earlier years, but becomes greater as time goes on. Federal and state law requires certain types of inflation, based on age, in order for a long term care policy to be "partnership certified".

Skilled Nursing Care

This is for medical conditions requiring care by skilled medical personnel, such as registered nurses and professional therapists. The care must be available 24 hours a day and is ordered by a doctor, usually in accord with a plan of care. Skilled care is often needed only for short periods, such as when recovering from acute illness or surgery. All long term care policies cover skilled care in an approved nursing home. Sometimes skilled care can be given at home by visiting nurses. A policy with home care benefits or Alternative Plan of Care benefits would pay for skilled home care.

Spend Down

This is a process of spending your savings on Long-Term health care, in order to qualify for Medicaid, the medical welfare program. Unmarried people must use up all but $2,000 (in most states - not including a primary home, a car, personal effects, and burial expenses) before Medicaid will pay. For couples, the spouse not receiving care can keep some of the joint assets. The amount varies from state to state. Long term care policies help avoid this spend down and protect assets. Partnership policies allow for dollar for dollar asset protection in the event of a longer than average long term care situation.

Standby Assistance

Standby Assistance means the presence of another person within arm's reach of the individual that is necessary to prevent injury while the individual is performing an ADL. It is sometimes referred to as Supervisory Assistance. An example is being ready to catch an individual who may fall getting into or out of a bath or shower. Most long term care insurance policies include standby assistance as part of the trigger for benefits.

Step-Down

A feature on a long term care policy which allows a policyholder to reduce coverage in exchange for a lower premium. For instance, a policyholder can reduce the monthly or daily benefit, or the total pool of money the policy will pay or increase the elimination period. A policyholder has the right to step down policy benefits (reduce coverage) at any time and should always be considered before lapsing coverage.

Substantial Assistance

Tax-qualified LTC policies must require that a policyholder must need "substantial assistance" in performing at least 2 ADL's in order to receive benefits. "Substantial Assistance" is defined as either "hands-on assistance" or "standby assistance".

Substantial Supervision

Under a tax-qualified LTC policy, an insured with cognitive impairment may receive benefits if he or she requires "substantial supervision." This is defined as continual supervision (such as cuing by verbal prompting, gestures, or other demonstrations) that is needed to protect the cognitively impaired individual from threats to his or her health or safety. An example is the need for someone to be present to prevent the individual from wandering.

Survivor Benefits

If both spouses have long term care polices, some policies will, on the death of one spouse, convert the policy of the surviving spouse to paid-up status. That is, the surviving spouse need pay no further premiums. This usually requires a higher premium for this option.

Tax-Qualified Policies

Beginning January 1, 1997, Long-Term care policies meeting certain requirements qualify for favorable tax treatment. Buyers of Tax-Qualified (TQ) plans can deduct the premiums if they itemize deductions on their federal tax return based on their adjusted Gross Income itemization requirement. The maximum deductible amount depends on age, and is adjusted annually for inflation. Premiums are treated like other health insurance and medical expenses. Also, benefits received from a TQ plan are not taxed.

Under IRC7702(b) businesses and self-employed individuals may also deduct premiums. For individuals, sole proprietors, LLC's and S-Corps, you can deduct premiums based on an amount the IRS lists each year based on your age. C-Corps may deduct 100% of the premium. Other tax benefits for self-employed and businesses exist. A person should consult a tax advisor for details.

Toileting

One of the Activities of Daily Living used to trigger benefits under a long term care policy. This is generally defined as getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene activities. (See also Activities of Daily Living.)

Transferring

One of the Activities of Daily Living used to trigger benefits in a Long-Term care policy. Transferring is the activity of getting into and out of bed or a chair or wheelchair. (See also Activities of Daily Living.)

Underwriting

The process whereby the insurance carrier reviews an individual's health status prior to issuance of a policy in order to determine if they are eligible for coverage. Underwriting for Long Term Care generally involves one or more of the following: completion by applicant of medical questionnaire, review of applicant's medical records, a telephone interview by a nurse or health aid including a cognitive test, an in-home physical and cognitive assessment by a nurse or health aide. The underwriting process for long-term care insurance is always dependent on the age and health of the person applying for coverage. Generally, the cost of underwriting is paid by the insurance company.

Waiver of Premium

A provision that a policy holder of a long term care insurance policy will not have to pay the premiums after receiving benefits from a policy.