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Do long-term care insurance premiums cease when benefits are received?

Do Long Term Care Premiums Cease When Benefits are Received?Once you make a claim, it is up to the insurance company (based on your contract policy) whether or not premiums must continue. In essence, if you file a claim shortly after signing a contract, they are immediately applying your premiums to their debt.

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The insurance companies must profit from an insurance policy if they are to remain in business. The insurance company selects insured clients who are least likely to make a claim and then calculate a premium rate.

By investing the premiums they receive, they can profit, as long as they measure their losses that come from claims. Naturally, some policies are going to bring profit while others bring loss, depending on the claims. These companies use actuarial science to help them create the most profitable policies.

How Insurance Premiums Work

Incoming claims are classified by the insurance company’s team based on their level of severity and are assigned to adjusters for investigation. Understand that once you make a claim you are costing the insurance company money.

Naturally, with some insurance types, premium payment ceases upon a claim. In life insurance, for example, there is no need, or ability, to continue paying a policy after the beneficiary receives the benefits. In auto insurance coverage, the policy is continuously paid so as long as the driver is on the road. How about with long-term care insurance?

First, let’s discuss what long-term care insurance is and how most policies work in this context. This type of policy provides financial coverage of long-term care indefinitely or for a specified period of time.

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Long-Term Care Insurance and Premiums

Individuals who require long-term care coverage may be given home care, assisted living care, respite care, hospice care, nursing home care or Alzheimer’s facilities care, depending on what facility the insurance policy specifies is covered. In exchange for this coverage, the insured (or the insured’s family) will pay a yearly or monthly premium. One advantage of this insurance policy is that premiums paid to the insurance company are eligible for an income tax deduction.

Some long-term care insurance companies offer contracts with term period coverage. For example, you pay over a ten, fifteen or twenty year-period and then premiums cease. Understand that with long-term coverage, you usually have a limit benefit and a maximum dollar amount (or sometimes a maximum number of days of nursing home coverage).

Basically, you can choose whether you want to pay for a covered period of time (as in “I’m only going to live here for one year, after that, a family member will take me in”) or indefinitely. If you choose the former, then the benefits are only paid and applied once in your lifetime. Some policies may require that you wait for a period of time before coverage begins.

Indefinite Coverage vs. Short Term Coverage

If you pay for indefinite coverage then you must continue to pay, so as long as you are taking advantage of the facility. You will continue to pay premiums even if you are confined to a home. Other plans may give you access to altering your benefit level on a periodic basic. Some policies even have what is known as a “specified percentage of actual or reasonable charges” on a per day basis. Last but not least, some policies have a clause allowing the return of a percentage of your premiums if the policy is discontinued but not paid out.

As you can see, the answer to this question largely depends on the insurance company. In general, paid claims are deducted from the premium return. Therefore, indefinite coverage would most likely require continual payments until the end of the nursing home stay or the resident’s death. If the resident dies or is removed from the home, some portion of those premiums may still be available for return. However, term policies can be paid in full, without any need for further premiums payments.

Bear in mind that more than one-third of all nursing home stays last in excess of one year. For the best rates possible, search for a long-term care insurance company policy while you are young and healthy. You can start looking right now using a web chaser tool. Why not start comparing rates so you can find an affordable policy?

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