What other plan design features might be included in my coverage?

While the nine plan design features discussed above are essential components in any plan, many policies will offer or automatically include one or more of the following features. Most of these features are considered “nice to have,” but generally are not deciding factors in plan design:

  • Bed reservation: this plan provision ensures that you can return to the same nursing facility or assisted living facility after a hospital stay or other absence from your nursing facility, by paying necessary charges to reserve your space in that facility. Plans typically include 14 to 30 days per year.

  • Respite care: most policies will include some amount of benefit which is available to give a primary informal caregiver (e.g., a friend or family member) a break from his or her caregiving responsibilities. This benefit is typically limited to 14 to 30 days per calendar year.

  • Restoration of benefits: some policies offer a feature that restores your benefits to their original level if, after a period of receiving benefits, you fully recover and do not receive benefits for a specified period of time (usually 180 days). However, this feature increases the premium, typically by four to ten percent. Also, if you exhaust your benefit pool before recovering, this feature is generally invalidated. This feature is not relevant with a lifetime benefit period.

  • Return of premium at death: some policies include an automatic feature that returns all premiums you have paid, net of any benefit payments received, if you die before a specified age – usually age 65. These policies typically phase out the return of premium by reducing the percentage returned for each year you live beyond age 65, such that by age 75, no premiums are refunded. Given that current US mortality exceeds age 75, this feature is of limited value. Other policies offer a special feature that returns premiums paid net of any benefits received regardless of the age at time of death. This feature typically increases the premium for the policy. We generally do not consider it to offer a good value.

  • Contingent nonforfeiture: Most newer LTC policies include a feature that is designed to protect you if the policy is subject to a significant rate increase. If rates increase over the life of the policy by more than a specified percentage, then you have the option to exercise this contingent nonforfeiture option, by stopping paying premiums but retaining a reduced lifetime benefit equal to the total premiums you paid over the life of the policy. The specified percentage increase varies depending on your age when you purchased the policy. While this feature is nice to have, it is one that offers little value, because the nonforfeiture benefit is so small and because the specified increase percentages are relatively high.

  • Nonforfeiture option: While contingent nonforfeiture is built into most current policies, one also has the option of purchasing an enhanced nonforfeiture option that provides that if you lapse your coverage for any reason whatsoever, you can nonetheless retain the rights to a reduced lifetime benefit equal to the total premiums you paid over the life of the policy. Typically, your coverage must be in force for at least three years before you can exercise this nonforfeiture option. Typically such a “shortened benefit period” or “reduced paid up” feature increases premiums anywhere from 10% to 58%. This option only adds value if you lapse your coverage, which occurs to less than 2% of all policies. Also, because LTC insurance premiums are usually minimal in comparison to the cost of care, this benefit is likely to be negligible. Accordingly, we do not believe this feature offers good value.

  • International coverage: Most LTC plans limit payment of benefits if you receive care outside of the United States. If you are contemplating retiring outside the US, you should read these provisions carefully. In particular, note that some carriers that say they cover care received outside the US may place substantial limits on the benefits for such care – e.g., benefits may be limited to no more that 1 year over the life of the policy, or may be limited to as little as 25% of the US home care benefit.