Long-Term Care Insurance: What you need to know

Long-Term Care Insurance (LTC) is a necessary evil, unless you have at least $2 million in readily available resources. Make no mistake, it is the hardest insurance to collect on by design. The goal is simple, hold onto your premiums for as long as possible, ideally forever.

First, the company hopes you never use it. Best-case scenario for them? You die before collecting a dime. This happens more often than you'd think. Adult children frequently discover a policy tucked away in a drawer after a parent has passed.

The next common mistake is assuming the insurance company will be helpful. Families call, expecting guidance or support. What they reach instead is "customer service" that's best described as aspirational. No one you speak with is looking out for your interests. You'll get different answers from different people, usually after no less than 45 minutes on hold.

Here's how LTC actually works.

To qualify, the insured must be unable to perform two of seven Activities of Daily Living (ADLs). The most common triggers are loss of balance and incontinence. Once that threshold is met, you call the insurance company and open a claim.

Then comes the "assessment." A representative, sent by the insurance company, arrives to decide whether you really need care. If the claim is denied, there is a slow and tedious appeal process, which is designed to be intentionally discouraging.

If you're approved, congratulations, you now enter the elimination period, typically 60 to 90 days. During that time, the family pays everything out of pocket. The insurance company will never reimburse you for those expenses.

Here's the kicker: while you're "waiting," you're also spending countless hours finding care providers, tracking services, documenting care and managing people who may or may not be qualified. Only after all of that can you finally submit for payment after 90 days. The cruelest blow of all, they pay after the treatment, which makes the elimination period 130 days.

Once you're in the system, the paperwork never ends. Monthly timesheets must be submitted accurately and on time or payment stalls.

There is a smart way to reduce the pain.

You can spread out the elimination period over time by opening a claim early, the first time in-home care is needed. Think knee replacement surgery. For two or three weeks, you may need daily assistance. Most families rely on a spouse or child but if you instead hire a caregiver and open a claim, those days count toward the elimination period.

When you're back on your feet, you pause the claim. Same claim. No penalty. You can repeat this process with each surgery or health event. Over the years, the elimination period shrinks, before permanent long-term care is required, not when your family is already overwhelmed.

Then there's the issue of "countable days."

LTC benefits are calculated daily, not weekly or monthly. If your policy covers two or three years, the insurance company is counting days and yes, they sometimes miscount. That means you must count too. We've recovered significant sums for clients because of these "errors"—in one case, $15,000.

The bottom line: Long-Term Care Insurance is essential—but it must be actively monitored. These companies are not in the business of caring for seniors, they are in the business of protecting their bottom line.

That's where we come in.

Parent Your Parents knows the rules, knows the traps, and yes, we know how to count.

About H. Frances Reaves, Esq.

An estate and Medicaid planning attorney, Frances began her legal career as a litigator/lobbyist. After 15 years in Maryland politics, she moved back to Key Biscayne and founded Parent Your Parents, an Elder Advocacy group.

She was inspired by her parents' struggle with the "Elder Bureaucratic System" and realized help was needed. Should you have any questions or comments, please contact her at hfrancesr@parentyourparents.com or 786-418-3303.

For Frances Reaves' last column, click here.