MOST PEOPLE DON'T KNOW ABOUT ELIMINATION PERIODS
An elimination period is essentially long term care insurance’s version of a deductible. It is a set number of days that the client pays for before the insurance company pays a benefit.
Most people I speak with are not familiar with what an elimination period is and the one’s that think they know typically don’t understand the full meaning. I also find that a lot of agents skim over the Elimination period quickly leaving clients thinking it is not a big deal. As you’ll see below the Elimination period is a big part of long-term care and if designed incorrectly can cause a nasty surprise come claim time.
THERE IS NORMALLY A 90-SERVICE DAY PERIOD
For example; an insured has a policy with a 90-service day elimination period. Then the insured has a stroke and needs help with his/her activities of daily living. After the claim is approved the insurance company will wait to pay benefits until 90 days of benefits have been paid for by the insured. Say the care the insured needs is about $150/day for Home care. 90 x 150 = $13,500. In this scenario the insured had to pay $13,500 before his long-term care policy started to pay his benefit.
This may seem like a lot or a small blip to the overall cost of long-term care, but it is something important to consider when purchasing a long-term care policy. Most policies sold today are sold with 90-day elimination periods. In my opinion this is for a couple of reasons.
A SERVICE DAY PERIOD IS DIFFERENT THAN A CALENDAR DAY PERIOD
Service day means that you actually have to receive 90 hands on days of care to reach the end of the elimination period. Jerry Brown, senior partner at Classe Financial Group, elaborated on this.
“Say you need care at home to start you claim but only need care four times a week, only four days counts toward the elimination period even though seven calendar days have gone by,“ said Brown. “In this Scenario the Elimination period would actually take 158 calendar days 22.5 weeks until the elimination period was met.”
On the other hand, calendar day means that 90 calendar days must go by before the elimination period is met. In the scenario above the elimination period would be met after day 90 even though they only paid for 52 days.
NOT KNOWING THE DETAILS OF YOUR POLICY CAN COST YOU
Some companies only offer calendar day elimination periods while some only offer service day. There are a few that let you pick which one you want with calendar costing a little bit more. Based on the two choices I recommend having a calendar day elimination period if it is available.
In closing, it is important to speak with someone who knows how elimination periods work because if they are designed wrong they could end up costing you significantly come claim time.
Classe Financial group
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