Long Term Care Insurance Defined

Facts about Long Term Care Insurance in North Carolina

Long-term care insurance is designed to pay some or all the costs of nursing home, community, or home health care when you cannot meet the needs of everyday living on your own. While such insurance is costly and might not cover all your expenses it can help to safeguard your assets and protect your financial stability. It is not for everyone. If your only income is Social Security, it is unwise to buy a long-term care policy.

Long term care insurance has two purposes:

−  To protect the lifestyle of your spouse and/or family from the high cost of long-term care
−  To protect your assets for your heirs

North Carolina Requirements for LTC Policies:

  • There can be no requirement for a prior hospital or skilled nursing home stay as a trigger for benefits.
  • All pre-existing conditions must be covered after six months.
  • Policies must be issued in a guaranteed renewable basis.
  • Portability is required for all group contracts.
  • A meaningful inflation protection must be offered.
  • Whether expressed or implied, no high pressure sales tactics are allowed.
  • After age 65, no attained age rating is allowed.
  • Policies must provide at least three levels of care for at least 12 months.
  • Policies must be issues free of exclusionary riders.
  • Policies cannot require that home health care be provided by an RN or LPN.
  • All policies must have a 30-day “free-look” provision.
  • Clinical diagnosis must be accepted on all organic brain disorders.
  • Annual lapse and financial reports must be filed with the Insurance Commissioner.
  • Third-party notification is required to prevent loss of coverage.
  • Rate revisions must be approved prior to implementation.
  • Insurance agents selling long term care insurance must pass a supplemental exam.
  • No new waiting period for preexisting conditions is required when replacing policies.
  • Advertising policies must be accepted by the Insurance Commissioner prior to use.

Important Terms:

INFLATION PROTECTION – The NC Department of Insurance requires companies to offer you at least one of three methods of increasing the daily benefit amount to offset the effect of inflation. You may reject or accept the offer. The three methods available are a) benefit levels increase annually at a minimum of five percent annually (simple or compounded), b) insurer guarantees periodic opportunities to increase benefit level, or c) benefit covers a specific percentage of actual reasonable charges. If you reject the inflation protection, it MUST be in writing.

FREE LOOK – All long-term care policies must provide a “free look” period of at least 30 days that will allow you to review your purchase. For a full refund, return the policy before the end of the 30 day period.

DUPLICATE COVERAGE – Do not buy duplicate coverage. Consider increasing current coverage instead. If you replace a policy with another new policy, North Carolina Department of Insurance regulations require agents or insurance companies to a) offer to check on all your other policies for possible duplicate coverage, b) warn you in writing not to cancel any policy until the “free look” period is over and you are satisfied with the new one and c) give credit for time spent under your previous policy toward satisfying pre-existing condition waiting periods.

ELIMINATION PERIODS – An elimination period is the time you must be confined to an eligible facility and must pay for the care you receive before a policy begins to pay benefits. Select the longest elimination period you can afford in order to keep costs down.

HOME HEALTH BENEFITS – Do not confuse at home recovery benefits with more extensive home health care benefits. Recovery benefits often are limited to short periods, usually no longer than your hospital or nursing home stay.

PRE-EXISTING CONDITION – A pre-existing condition is an illness or disability for which you received medical advice or treatment during a period of time before you apply for insurance. Most policies do not pay for these conditions during the waiting period after you become insured. State law limits the long-term care preexisting policy waiting period to six months.

GUARANTEED RENEWABLE – Long-term care insurance policies sold in North Carolina must be guaranteed renewable. This means you must be allowed to continue in force as long as the premiums are paid. The company may not change policy provisions or refuse to continue your coverage. Premiums, however, may be raised for an entire class of policyholders. Policies issued on or after December 1, 1994 may not increase rates based on attained age after your 65th birthday.

PREMIUM PRICING – Policies with attained age pricing have premiums that start low but increase with the policyholder’s age Policies with issue-age pricing have premiums that do not increase solely due to increasing age.

MENTAL AND NERVOUS DISORDERS – Long- term care policies may limit or exclude coverage of some mental or nervous disorders. However, they must provide coverage of Alzheimer’s’ disease and related disorders of biologically caused brain diseases and serious mental illness, including progressive dementing illness, organic brain disorders and degenerative brain disorders.

NONFORFEITURE BENEFITS – A nonforfeiture benefit provides that after a policyholder has paid into a policy for a specified period of time, the policyholder continues to have some benefits even if he/she is unable to continue paying premiums. Those benefits take different forms and affect the policy price.