A Buyer’s Guide To Long-Term Care Insurance
to certify that the affected parent’s need for care is due to an illness or injury, and that care is “medically necessary” — meaning it’s needed to prevent the illness or injury from worsening. This trigger excludes frailty or weakness and can be a very difficult standard to meet. Avoid any policy with this benefit trigger.
If premium payments become unaffordable
Some policies have extra provisions that provide some refund protection if, years down the road, your parents can’t keep paying the higher policy premiums. A good refund provision can make one policy more attractive than a similar alternative. There are several types of refund provisions:
“Step-down” provision. This allows your parents to lower their premiums in exchange for a lower benefit amount or a shorter benefit period.
Nonforfeiture provision. The term nonforfeiture is a bit misleading. It doesn’t prevent forfeiture of the policy’s benefits, but it does provide a small refund if your parents drop their coverage before collecting benefits. If your parents have paid premiums for a minimum number of years (usually 15 or 20) and then can no longer afford the premiums, this provision will refund a small percentage of the total payments.
Reduced paid-up provision. This allows your parents to drop the policy — that is, stop paying premiums — after a set amount of time (20 or 25 years) but still collect a reduced benefit amount if and when they qualify for benefits.
Death refund. This provides a small refund to your parents’ estate if they die before a certain age (usually 65, 70, or 75).
Survivorship provision. If both your parents buy a single long-term care insurance policy, this provision allows your surviving parent to stop paying premiums a certain number of years after your other parent’s death, with the policy remaining in force.
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