Insurance Policy Glossary

Elimination Period: An elimination period in a long term care insurance policy is similar to a deductible. It is the amount of time the insured has to pay for care before the policy begins to pay. The insured may pay for the first 20, 45 or 100 days of care, for example, before the policy begins to pay. The longer the elimination period, the lower the premium.
Inflation: Inflation refers to the decreasing value of money due to rising prices. Many policies have inflation protection, which means that the dollar amount the policy will pay increases over time in order to compensate for the increase in nursing home rates.
Benefits: Benefits are the payments made under the insurance policy. Many policies pay a daily benefit, or up to a certain dollar amount per day, for care. Some policies pay a benefit only for skilled nursing care, but others may include a benefit for home care or assisted living care.
Assisted Living Facility (ALF): An assisted living facility is a residential community that provides some assistance with daily living for its residents. Assistance may be provided with things like meal preparation, medication administration, transportation and so forth. An assisted living facility is appropriate for people who need some extra help with daily needs but do not yet require skilled nursing care.
Deductible: A deductible is the amount of money the insured has to pay out of their own pocket before the insurance policy begins to make payments. In a long-term care policy, the deductible is often referred to as an “elimination period” and is expressed in days. In some cases, it may be expressed in dollars. For example, the insured may have to pay the first $500 of home care, and then the policy begins to pay.
Caregiver (primary & secondary): A caregiver is someone who takes care of someone else. In the case of elderly people who need assistance, a primary caregiver is often a spouse or other family member, while the secondary caregiver may be someone who is paid to care for the person when the primary caregiver is unavailable. Some people have only paid caregivers because there is no family to care for them or they need more care than family members can provide.
Daily Benefit Amount: The daily benefit amount is the amount a long-term care policy will pay per day. The cost of nursing home care is typically expressed in dollars per day. If someone has a policy with a $200 daily benefit amount and enters a nursing home that costs $275 per day, the insured will have to pay the $75 per day that the policy does not cover.
Limits: Most policies have limits on the amount of money they will pay for care. There is often a daily or monthly limit, and a limit to the number of months or years of care the policy will pay for. The higher the limits on the amount and duration of care, the more expensive the policy will be.
Liability: A liability is a risk that might result in a financial cost for the insured. Insurance policies take over that risk in the sense that if the person sustains the liability, the insurance policy will pay. In the case of long-term care insurance, the liability is the possibility that the insured will require long-term or skilled nursing care.
Depreciation: Depreciation is, in a sense, the opposite of inflation. The value of things typically decline over time, either because the item becomes less useful or the cost to replace it increases. In this case, the value of a policy may depreciate if the daily benefit stays the same while the cost of care increases.
Premium: The premium is the payment that is made to the insurance company for the insurance coverage. Age, health and benefit amount will all affect the premium. Once a long-term care policy begins to make payments (i.e., the insured requires care), premiums no longer need to be paid.
Rider (Endorsement): A rider or endorsement is a special, optional feature of an insurance policy. In the case of a long-term care policy, riders may be offered that increase the benefit to keep pace with inflation, or that allow a spouse to use some of the benefit allocated to the other spouse. There is an extra charge for riders.