The term usually used to describe the way insurance companies decide when to pay benefits is “benefit triggers.” This term refers to the criteria and the methods that the insurance company uses to evaluate when you are eligible for benefits, and the conditions you must meet to receive benefits. This is an important part of a long-term care insurance policy. Look at it carefully as you shop. The policy and the outline of coverage usually describe the benefit triggers. Look for a section called “Eligibility for the Payment of Benefits” or simply “Eligibility for Benefits.” Different policies may have different benefit triggers. Some states require certain benefit triggers, and the benefit triggers for tax-qualified contracts are also fairly standardized across insurance policies. Check with your state insurance department to find out what your state requires.
NOTE: Companies may use different benefit triggers for home health care coverage than for nursing home care, although most do not do so. If they do, they generally have a more restrictive benefit trigger for nursing home care than for home care.
Types of Benefit Triggers
Activities of Daily Living. The inability to do activities of daily living, or ADLs, is the most common way insurance companies decide when you are eligible for benefits. The ADLs most companies use are bathing, continence, dressing, eating, toileting and transferring. Typically, a policy pays benefits when you cannot do a certain number of the ADLs, such as two of the six or three of the six. The more ADLs you must be unable to do, the harder it will be for you to become eligible for benefits. Federally tax-qualified policies are required to use the inability to do certain ADLs as a benefit trigger. A qualified policy requires that a person be unable to perform at least two of their ADLs to collect benefits. The ADLs that trigger benefits in a tax-qualified policy must come from the list above. These triggers are specified in your policy.
If the policy you’re thinking of buying pays benefits when you cannot do certain ADLs, be sure you understand what that means. Some policies spell out very clearly what it means to be unable to feed or bathe oneself. Some policies say that you must have someone actually help you do the activities. That’s known as hands-on assistance. Specifying hands-on assistance will make it harder to qualify for benefits than if only stand-by assistance is required. The more clearly a policy describes its requirements, the less confusion you or your family will have when you need to file a claim.
NOTE: The six activities of daily living (ADLs) have been developed through years of research. This research also has shown that bathing is usually the first ADL that a person cannot do. While most policies use all six ADLs as benefit triggers, qualifying for benefits from a policy that uses five ADLs may be more difficult if bathing isn’t one of the five.
Cognitive Impairment. Most long term care insurance policies also pay benefits for “cognitive impairment.” The policy usually pays benefits if you cannot pass certain tests of cognitive function. Coverage of cognitive impairment is especially important if you develop Alzheimer’s disease or other dementia. If being unable to do ADLs is the only benefit trigger your policy uses, it may not pay benefits if you have Alzheimer’s disease but can still do most of the ADLs on your own. But if your policy also uses a test of your cognitive ability as a benefit trigger, it is more likely to pay benefits if you have Alzheimer’s disease. Most states do not allow policies to limit benefits solely because you have Alzheimer’s disease.
Doctor Certification of Medical Necessity. Some long-term care insurance policies will pay benefits if your doctor orders or certifies that the care is medically necessary. However, tax-qualified policies cannot use this benefit trigger.
Prior Hospitalization. Long term care insurance policies sold in the past required a hospital stay of at least three days before paying benefits. Most companies no longer sell policies that require a hospital stay.
NOTE: Medicare still requires a three-day hospital stay to be eligible for Medicare payment of skilled nursing facility benefits.