Legal: Types of Long Term Care Insurance Policies

There are three types of long term care insurance policies:

Reimbursement policies are the least expensive and most effective and efficient. They simply reimburse some or all of your out-of-pocket long term care expenses, up to your designated daily, weekly or monthly limit.
Indemnity policies will remunerate the eligible benefit recipient for the designated daily, weekly or monthly amount, provided qualified expenses have been incurred.
Income policies are the most expensive and will remunerate the designated daily, weekly, or monthly limit to qualifying claimants, regardless of whether services are received.

What is Not Covered? (Exclusions and Limitations)

Most long term care insurance policies do not pay benefits for the following:

A mental or nervous disorder or disease, other than Alzheimer’s Disease or other dementia
Alcohol or drug addiction
Illness or injury caused by an act of war
Treatment the government has provided in a government facility or already paid for
Attempted suicide or intentionally self-inflicted injuries

Note: Be certain that the policy you choose covers Alzheimer’s Disease and other forms of dementia. At the time of writing, all policies being sold in Canada do cover these cognitive impairments.

How Do You Know How Much Coverage You Have and Is There a Maximum?

The policy or certificate may state the amount of coverage in one of several ways.

A policy may pay different amounts for different types of long term care services
Be sure you understand how much coverage you will have and how it will cover long term care services you receive

Most policies limit the total benefit they will pay over the term of the policy, but a few don’t. Some policies state the maximum benefit limit in years (one, two, three or more or even lifetime). Others write the policy maximum benefit limit as a total dollar amount. Policies often use words like “total lifetime benefit,” “maximum lifetime benefit,” or “total plan benefit” to describe their maximum benefit limit. When you look at a policy or certificate be sure to check and understand the total amount of coverage. Read your long term care insurance policy carefully to learn what the benefit period is.

Information from Long Term Insurance in Canada: What is it and do I need it?, The Council on Aging of Ottawa, February 2005.

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