Understanding insurance can be challenging, especially if you are new to long-term care (LTC) policies. Waiting period or elimination period means the same thing. In this post, we’ll demystify the elimination period, explaining what it is and how it’s similar to a deductible. Additionally, we’ll share some typical time frames, explain how they affect your benefits, and break down your out-of-pocket costs during the waiting period. Before we wrap up, we’ll provide strategies to help you pick the optimal elimination period for you, as well as how the policy you choose will affect both your premiums and claims.
Understanding the Waiting Period
One of the most essential parts of your LTC insurance is your waiting period. Below, we’ll define what it is, how it works, and how it compares to deductibles in traditional health insurance policies.
Definition of the Waiting Period and how it works
The waiting period, or the evaluation period, is the time you have to wait before you are eligible to receive your LTC policy benefits. During your waiting period in long-term care, you are responsible for all costs incurred until your LTC policy kicks in.
Typical LTC waiting period can range from 30 days to one year. Once your evaluation period has passed, the policy will begin covering the costs. For example, if your policy has a 60-day elimination period, you will be responsible for paying out of pocket for the first 60 days of your long-term care. On the 61st day and beyond, your LTC insurance policy will kick in to cover costs.
A waiting period in long-term care functions similarly to a deductible on your car insurance policy, but there are differences. Instead of a monetary limit, LTC insurance policies focus on time-based ones.
For example, in a traditional car insurance policy, you may have a $500 deductible. You have to pay $500 out of pocket on damages before your car insurance policy will cover it. It is the same for LTC policies, but with time. If your elimination period is 30 days, then you will need to pay for your care expenses for the first 30 days until your policy terms are met.
Key differences from deductibles in traditional health insurance
There are several key differences from deductibles in conventional health insurance. They include:
- LTC is bound by time, not money. There is no limit to your out-of-pocket cost within the elimination period of your LTC policy, unlike traditional health insurance, which requires you to meet a monetary limit before full coverage will kick in.
- Even if you meet your health insurance deductible, most long-term care will not be covered in your policy. Health insurance typically covers medical expenses (i.e., going to the doctor, prescription medicine, hospital stays). Conversely, LTC policies focus on the care you need to live your life (i.e., home care, assisted living centers, and nursing home stays).
- LTC policy premiums may be tax-deductible if your total expenses for the year exceed 7.5 percent of your annual gross income and you meet all additional IRS requirements.
A waiting period in long-term care differs from traditional health insurance deductibles.
Common Waiting Period Options
The length of your elimination period is outlined in your LTC policy.
1. Typical durations: 30, 60, and 90 days
While each LTC policy is different, the most common waiting periods include the following.
- 30 days
- 60 days
- 90 days
30-day elimination periods often carry the most expensive premiums, but you will receive full coverage sooner than longer, lower-cost premiums.
2. Less common options like 180 or 365 days
LTC policies also offer 180 or 365-day elimination periods. The premiums on these policies are often lower because the waiting period is so long.
Individuals may choose these longer-term policies if they have savings to sustain them during the initial 6 months or year of initial care. While the initial out-of-pocket cost will be high, you will save money on your premium, even when you’ve exceeded your elimination period.
3. How insurers define and count days (calendar vs. service days)
Refer to your LTC policy to understand how insurers define and count days in your elimination period.
- Calendar day elimination periods measure the passage of time by consecutive calendar days. If you have a policy with a 30-day calendar-day elimination period, and you begin to receive services on June 1, your policy would take effect on July 1.
- Service day elimination periods are based on the number of days that you receive services. For example, if you have a 30-day service day waiting period in long-term care and receive services only twice a week, you will need to wait 30 service days to pass before your benefits are triggered.
There are pros and cons to each, so ensure that you choose a waiting period insurance that makes the most financial sense for you and your loved ones.
How the Waiting Period Affects Policyholders
In addition to being a period where you have no coverage, your insurance waiting period may have other impacts on your life, including the following.
Out-of-pocket responsibility during the waiting period
All financial costs incurred during the long-term care waiting period are your responsibility. That means you will need to pay for them out of pocket until your policy is triggered. This can cause significant financial stress, even if you have savings to help cover the costs.
Impact on when benefits begin and how long they last
The length of your benefits will be outlined in your policy. Typically, LTC policies last between 2 and 5 years. Your elimination period will be included in that time frame. If you have a 365-day elimination period and a 3-year policy, your benefits qualify for the remaining two years after the elimination period ends.
The financial risk of choosing a more extended period
Policyholders incur a more substantial financial risk up front when they choose a longer elimination period. If your elimination period is 180 days, you will be responsible for all financial costs for the first six months of care. If your loved one is in a nursing home, this will include the monthly expenses and any additional fees, which can quickly add up.
Choosing the Right Waiting Period
There is no magic formula to choose the correct long-term care waiting period. Below are several factors to consider to help you make the best decision for you.
Balancing lower premiums vs. higher upfront costs
A longer elimination period can result in a lower premium, which may seem like a good idea. However, it’ll result in higher upfront costs that you’ll need to pay out of pocket. Consider how long you anticipate your loved one needing coverage, as well as the average price of services in the area, to help you decide if a lower premium makes more financial sense.
Considering personal savings, health status, and care expectations
Reflect on your situation. If you or your loved ones are healthier, the services may be less expensive than if you require more hands-on care. Private rooms are often more expensive than single rooms, so it is essential to have a clear understanding of your expectations for care. Consider how much money you have available to allocate for long-term care out of pocket.
How to evaluate trade-offs for long-term affordability
Now that you have an idea of your situation, you need to evaluate which evaluation period is right for you, including what you are trading off for long-term affordability. If you opt for a lower premium, you may end up depleting your savings or racking up debt to pay for care.
If you’re not careful, choosing the wrong elimination period can result in higher costs in the long term.
Real-World Scenarios and Planning Tips
To help you understand elimination periods and plan, please consider the following.
- You have an LTC policy with a 90 calendar day elimination period. Your mother is starting care in a nursing home on January 1. You will be responsible for the cost of care from January 1 through April 1. On April 2, your LTC benefits will kick in, and the policy will help reduce your costs.
- Your LTC policy has a 60-day service day elimination period, and you receive hospice care services three days a week, starting on June 1. Roughly, your elimination period would run through the middle of October. Depending on the calendar dates, your LTC policy benefits would begin during late October.
Keep in mind that you may have some out-of-pocket costs, even after you meet your elimination period based on your policy’s coverage.
Planning for potential care gaps
There are steps you can take to help plan for potential care gaps as you are planning for long-term care and during your elimination period.
- Cut unnecessary costs. Look at areas you can trim to help you save, especially if your family member will be entering a care center.
- Save as much as you can. Set up a separate account where you save exclusively for long-term care.
- Determine your budget. Understand how much you can afford to spend on long-term care out of pocket. You will need to cover the costs during the elimination period, so it needs to be affordable.
- Keep a safety net. Don’t spend all of your savings. Ensure you have a safety net in place in case the unexpected happens.
Talk with an Extended Care Benefits Advisor to customize your coverage
Extended Care Benefits Advisors at Lavine LTC Benefits are here to help. Set up a call with our qualified advisors, and they will recommend a customized coverage plan tailored to your needs. They will determine your ideal waiting period, policy length, and more to help you get the long-term care you need.
Conclusion
Waiting periods are the time that you have to “wait” for your coverage to kick in. They range from 30 days to one year. After you meet the insurance waiting period requirements, your LTC policy will be triggered.
Whether you’re considering the elimination period, long-term care length, policy terms, or premium rates, it’s essential to compare your LTC policy options carefully. Weigh the pros and cons of each to ensure you are getting the policy that meets your needs.
Consult Lavine LTC Benefits for personalized advice.
Lavine LTC Benefits understands that navigating LTC insurance can be challenging, and we’re here to help. We offer personalized advice to help you pick the right LTC policy. Contact Lavine LTC Benefits today.