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The elimination period is the first major policy provision that your client will encounter after the care coordinator certifies their need for care. With many long-term care policies, benefits don't start the first day your client goes to a nursing home or when your client starts using home care. Most policies have an elimination period (sometimes called a deductible or a waiting period). That means benefits can start 0, 20, 30, 60, 90, or 100 days after your client starts using long-term care or becomes disabled. How many days your client has to wait for benefits to start depends on the elimination period they chose when buying the policy. During the elimination period, your client must pay for their care before the policy benefits become available.
This is not to be confused with the 90-day certification period required on tax qualified LTC insurance policies. With tax-qualified policies, it must be certified that your client is unable to perform at least two or more activities of daily living (ADLs) without substantial supervision from another person, due to a loss of functional capacity. This loss of functional capacity must be expected to continue for at least 90 days. This expectation is sometimes called the "certification period" or "qualification period." In other words, your client is subject to the elimination period once their condition is certified as a long-term care event that will last at least 90 days.

 Many policyholders forget that satisfying the elmination period is not as simple as counting off the days on the calendar. The nuances of this policy feature are easily forgotten even after taking the California tax qualified LTC course.

The Zero Day Elimination Period

With a zero-day elimination period, benefits are payable as soon as the care is needed. If you sell a policy with a zero-day elimination period for home and community based care, your client should have no problem understanding the elimination period because everyone can count to zero and facility care is generally provided for consecutive-days.

The Calendar Day Elimination Period

Under the calendar-day elimination period, every day of the week would count in determining the elimination period regardless of whether your client received any services on those days. If you sell one of the few policies with a calendar-day elimination period, your client should not have a problem understanding how it works, assuming they can count off-days on a calendar. A policy with a calendar-day wait will even allow relatives, roommates, or friends to provide care during the elimination period. This is a great way for relatives to assuage their guilt before they leave their ailing relative in someone else's care. Relatives who can take care of your client during the elimination period can help your client save that big deductible.
I recommend that you sell a plan with a zero-day elimination period for home and community based care or sell a calendar-day elimination period. These types of elimination periods may not always be available with some other desired feature, so you should know some of the restrictions when satisfying other types of elimination periods.

"One-day Equals Seven" Elimination Period

After the zero-day and calendar-day elimination periods, the next best version of the elimination period is the "one day equals seven" elimination period. It requires that the elimination period be satisfied with days of care, but will give your client a week toward their elimination period as long as they have one home care visit in that week. This is a satisfactory definition as long as your client understands it.

Days of Services Elimination Period

If the policy doesn't have a zero-day, calendar-day, or "one-day equals seven" elimination period, it probably has a "days of service" elimination period. If your client is receiving help once a week for bathing and dressing, with a 100 "days of service" elimination period, it would take 100 weeks (almost two years) to satisfy the elimination period and have the policy start paying for care. This can be a problem if the client is not perfectly clear how it works.

Catastrophic LTC Insurance

If your client has enough assets, they may choose a long elimination period to lower the premium. They may want to buy catastrophic LTC insurance. However, the initial diagnosis of a chronic condition is catastrophic to a family.
People buy LTC insurance because they do not want to be a burden to their family and friends. With a zero-day elimination period, it is less likely that a loved one is burdened with the decisions of which assets to sell or how to arrange care during the long elimination period.

Thirty years from now, the average cost of care could be $80,000 during a 100-day elimination period, but let's not dwell on the costs or the probability of needing LTC. Let's discuss the consequnce for your client's loved ones. What are the consequences of not having a plan with benefits immediately available after a devastating diagnosis?

Jack and his wife, Diana Schmitz LTCP, are owner/operators of Bay Area Disability Insurance Services, Inc. and are doing business as DI & LTC Insurance services. DI & LTC Insurance Services is a brokerage general agency and is the Northern California partner of The Plus Group, a national Disability Income and long-term care insurance marketing organization. Jack is a past president of the Marin chapter of NAIFA and is on the board of directors of both the North Bay Society of Financial Services Professionals and The Plus Group/US L.P. For more information, call 800-924-2294 or email jack@di-ltc.com.