Understanding a long-term care insurance (LTCI) policy should not require a law degree, but too often, it feels that way. Insurance companies rely on dense policy language, vague definitions, and technical jargon to confuse policyholders, delay claims, and deny benefits. When you or a loved one needs care, every day without support takes a toll. You deserve clarity, not red tape.
This glossary defines key terms related to Long-Term Care Insurance (LTCI) to help policyholders and their families understand their coverage and navigate the claims process. The definitions below may not apply to all long-term care insurance policies and may be different depending on the state.
- Activities of Daily Living (ADLs): These are the basic activities that enable you to take care of yourself, including bathing, dressing, transferring (moving in and out of a bed or chair), eating, toileting, and continence. Each policy specifies its own definition of ADLs. Individuals needing help with one or more of these are said to have an “ADL limitation.” Policies typically specify how many ADLs you must have before benefits are paid. Persons needing help performing ADLs may require “hands-on assistance” or “standby assistance”.
- Adult Day Care Facility: A state-licensed facility that can provide care during the day and maintains records of services. It is not an overnight facility and has established procedures for medical emergencies.
- Alternate Plan of Care: An option offered by some LTC policies, developed by a health professional, as an alternative to institutional care. This plan may cover services like home health care or adult care centers.
- Assisted Living Facility: Defined differently by each state, an assisted living facility generally is a residential arrangement that provides personal care and health services for individuals needing assistance with ADLs. These facilities allow for a relatively independent lifestyle for those who do not require the intensive care of nursing homes.
- Bathing: One of the Activities of Daily Living, referring to the ability to wash oneself, whether in a tub, shower, or with a sponge.
- Bed Reservations: Some policies will pay to reserve a nursing home bed if the insured needs to go to a hospital, allowing them to return to the same bed after their hospital stay. There is typically a limit on the number of days a bed will be reserved, often 14 to 21 days.
- Benefit Period: The duration for which an insurance company pays for your care, starting from the first day of payment until care is no longer needed or maximum policy benefits are reached. A new benefit period can begin after a specified period without care, sometimes 180 days, which may require satisfying a new waiting period.
- Benefit Triggers: The specific conditions that must be met for an LTC policy to pay benefits. Common triggers include a specified number of ADL limitations (usually two) or cognitive impairment. LTC plans generally do not use “medically necessary care” as a benefit trigger.
- Case Management/Care Management: Some policies may require or offer case management. A case manager, chosen by the insured, family, doctor, or insurer, evaluates the need for care and determines the most suitable type of care.
- Cash Benefit: Policies that pay a fixed amount to the insured while they qualify as disabled, irrespective of the actual cost of care received. The amount may vary based on whether the insured is in a facility or receiving community care.
- Chronically Ill: A certification required by tax-qualified LTC or LTCI policies, indicating that an insured is unable to perform at least two ADLs without substantial assistance for at least 90 days due to a loss of functional capacity, or has a severe cognitive impairment.
- Cognitive Impairment: Deterioration or loss of mental capacity requiring continual supervision to ensure the safety of oneself or others. This may include impairments in short-term or long-term memory, orientation (person, place, time), or deductive or abstract reasoning.
- Continence: One of the Activities of Daily Living, referring to the ability to control one’s urination or bowel movements.
- Contingent Nonforfeiture: A provision that offers nonforfeiture benefits if the policy issuer increases premiums on in-force policies. This is triggered when the cumulative percentage increase in premium exceeds a threshold based on the issue age.
- Convalescent Care Facility: A skilled nursing or intermediate care facility that is typically state-licensed or Medicare-approved. Such facilities may have a doctor on call for emergencies, a nurse on duty at all times, procedures for handling medications, and maintain medical records.
- Coordination of Benefits: A policy feature where benefits may be paid only after other insurance policies or government agencies have made their payments, rather than in addition to them.
- Custodial Care: Assistance with Activities of Daily Living provided by individuals without medical training. This may include help with meal preparation, medication, and other routine activities, and can be given in various settings such as nursing homes, adult day centers, or at home.
- Daily Benefit (Limits): The maximum amount an LTC or LTCI policy will pay per day for covered long-term care services. Often, the daily benefit is higher for facility care than for home care. If the actual cost of care exceeds this limit, the policyholder is responsible for the difference.
- Deficit Reduction Act (DRA): A 2005 law that significantly tightened Medicaid eligibility for long-term care services, extending the look-back period for asset transfers from 3 to 5 years. It also introduced provisions preventing applicants with substantial home equity from receiving Medicaid benefits and allowed states to create LTC Partnership programs.
- Dementia: The deterioration of intellectual function caused by a brain disorder.
- Elimination Period: The time between when you begin receiving care and when the policy starts paying benefits. Common elimination periods are 30, 60, or 90 days, though some policies begin coverage immediately if you pay a higher premium. This period only begins after the insured meets the policy’s benefit triggers. Not all elimination periods are the same. Insurers use different methods to calculate them.
- Exceptions/Exclusions: Specific situations outlined in policies where benefits will not be paid. These commonly include care for intentionally self-inflicted injuries, care paid by the government, or care for which no charge is made without insurance. Some policies may also exclude care received outside the United States or care provided by family members.
- Extension of Benefits: If a policy is canceled or premiums cease while the insured is receiving care, this feature allows benefits to continue for the current care period, up to the policy’s lifetime maximum. This typically applies to nursing home care.
- Free-Look Period: A period, usually 30 days, during which you can return a policy after purchase and receive a full refund if you change your mind. The process is detailed in the policy.
- Functional Impairment Triggers / Functionally Disabled: The inability to perform a prescribed number of Activities of Daily Living (ADLs) without assistance or having a cognitive impairment. This is a key criterion for triggering long-term care insurance benefits, focusing on daily life limitations rather than “medical necessity” as defined in health insurance. For example, a policy might require the inability to perform two out of six ADLs, like eating, transferring, toileting, bathing, and dressing.
- Future Purchased Option (FPO): A form of inflation protection that gives the insured the right to periodically increase benefits (e.g., annually or every three years) to account for rising care costs. These increases can often be elected without providing evidence of insurability, provided the insured is not currently receiving benefits.
- Home Health Care: Care provided by a state-licensed agency, which can include services from nurses, home health aides, nutritionists, or various therapists. It may not cover services from family members or homemakers.
- Hospice Care: Short-term, supportive care for terminally ill individuals with a life expectancy of six months or less. It focuses on pain management and emotional, physical, and spiritual support for the patient and family. It can be provided in various settings.
- Indemnity Benefit: A fixed amount paid by a policy when care is received, regardless of the actual cost of the care. For example, a policy with a $100 nursing home indemnity benefit will pay $100 for each covered day, regardless of what the nursing home charges.
- Inflation Protection: Policy options that increase the maximum daily benefit and total lifetime benefit each year to account for future increases in long-term care costs. Buyers can usually choose between simple and compound increases.
- Informal Care: Care provided by family members or friends. Some LTC or LTCI policies may offer benefits for informal care.
- Intermediate Nursing Care: Care for stable conditions that requires daily, but not 24-hour, nursing supervision, as ordered by a doctor.
- Instrumental Activities of Daily Living (IADLs): Activities beyond basic self-care, such as using a telephone, shopping, traveling outside the home, taking medications, managing money, preparing meals, and doing housekeeping or laundry. Inability to perform these without assistance indicates an IADL limitation.
- Long-Term Care (LTC): Care needed due to illness or disability when an individual is unable to care for themselves. This care can be provided in various settings, including nursing homes, assisted living facilities, adult day-care centers, or at home. “Formal” long-term care is provided by paid caregivers, while “informal” care is provided by family or friends.
- Long-Term Care Denials: The refusal by an insurance company to pay for long-term care services under a policy.
- Long-Term Care Insurance (LTCI): A type of insurance that helps cover the costs of long-term care services. It is distinct from long-term disability insurance and does not provide income replacement; instead, it pays for assistance with daily living activities.
- Long-Term Care Appeals Process: A process by which policyholders can dispute a denial of their long-term care claim. Appeals in LTC cases are not always necessary. Some policies provide between 30 and 180 days to appeal.
- Medicaid: A joint federal and state government program that helps pay medical costs for eligible low-income individuals, including nursing home and some home care costs for those who are disabled and meet financial asset and income requirements.
- Medicare: The federal government program providing health insurance for people over 65. Medicare pays for very limited long-term care.
- Medigap: Private insurance policies that supplement Medicare coverage by paying for care that is approved by Medicare but not fully covered, such as coinsurance and deductibles. Medigap policies do not pay for services not covered by Medicare.
- Mental and Nervous Disorders: Refers to mental or emotional diseases or disorders not of organic origin. Alzheimer’s Disease and senile dementia are considered organic and are typically covered by most insurance companies. Policies may not cover non-organic mental and nervous disorders or those related to alcohol or drug addiction.
- Nonforfeiture: An optional rider that provides a residual benefit if policy premiums stop being paid (lapse). This often results in a paid-up policy providing the regular daily benefit for a shortened period, or a return of some of the premiums paid.
- Partnership Policies: Long-Term Care Insurance Partnership programs, which originated in certain states, allow buyers to shelter assets from Medicaid if they exhaust their LTCI benefits and subsequently become eligible for Medicaid.
- Policy Exclusions: Specific conditions or types of care that are not covered by an LTC policy.
- Provider Qualification: Requirements set by an LTC policy regarding who can provide covered care. Some policies may only cover licensed providers, excluding family caregivers or certain types of home health aides.
- Reimbursement Delays: The time it takes for an insurance company to repay policyholders for covered long-term care expenses after they have paid out-of-pocket, which can sometimes take months.
Contact Sandstone Law Group Today
The language in a long-term care insurance policy is not just confusing; it can be the difference between receiving the care you need and facing a devastating denial. Unfortunately, insurers often use that confusion to their advantage.
Understanding what these terms mean and how they are applied can help you recognize when a claim is being wrongfully delayed or denied. At Sandstone Law Group, we are committed to leveling the playing field for policyholders. If you believe an insurer is misinterpreting your policy language or hiding behind technicalities to avoid paying your claim, we are here to help.
Call us at (858) 544-0716 for a consultation. Let us make sure the policy you paid for delivers the protection you were promised.