Traditional Long Term Care Insurance

What is Traditional Long Term Care Insurance (LTCI)?

Traditional Long Term Care Insurance is simply an insurance plan which helps pay for Long Term Care expenses in exchange for a premium.  The contributed premiums create a pool of money to be used for long term care, if necessary.  If the money is not used, the insured loses it, as these plans have no cash value.

Until recently, consumers had only one option for LTCI:  Traditional Long Term Care Insurance.  Today other types of policies exist, including Asset Based Long Term Care, Hybrid Linked Benefit Plans, and Home Health Care Plans.  Traditional LTCI still has its place because it’s generally more affordable than other plans.  With the recent rate increases for other types of Long Term Care Insurance policies, a lower-cost plan like Traditional LTCI will always be a viable option when planning for your Long Term Care needs.

Advantages of Traditional Long Term Care Insurance

  • Your policy can be custom-tailored to your unique personal situation
  • Your premium is guaranteed renewable
  • You will always have coverage as long as you pay your premium, although premiums may vary (can premiums vary?)
  • Traditional LTCI is pay-as-you-go, meaning the premium does not have to be paid all at once (as with Asset-Based LTCI) A return of premium rider (an attachment, schedule, amendment, or other writing that is added to a document in order to modify it) is available, for a fee.  This gives you protection against losing your benefit if you never end up needing Long Term Care

Disadvantages of Traditional Long Term Care Insurance

  • Traditional LTCI policies have no cash value
  • If you do not make a claim, you will not receive any benefits
  • Your premium may increase depending on class increases (explained below under “Problems with Traditional Long Term Care Insurance”)

Problems with Traditional Long Term Care Insurance

The biggest flaws with Traditional Long Term Care Insurance coverage are that it has no cash value, it does not give any benefit unless you make a claim, and your premium may increase based on factors that have nothing to do with you personally.  Owners of Long Term Care Insurance were previously placed in “classes” (i.e. by age, by health problem, etc.).  If the overall rate for your class went up, then your rate would go up as well, regardless of your health.  The insurance industry noticed that consumers’ needs were not always being met by their LTCI, which led them to develop hybrid, or asset-based policies that addressed the concerns of their policy holders.

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