Length-of-Benefit Time Period

An important consideration when choosing a long-term care insurance policy is the length of the benefit. This means the number of years over which the policy will pay benefits. The longer the benefit period, the higher the long term care insurance rates, but the more the policy will pay out if there is a need for long-term care for an extended period of time.

• Many policies offer a choice of benefit periods. Common benefit periods are three, five or seven years. Some policies offer a “lifetime” or unlimited benefit period, which will pay benefits no matter how long the long-term care is required. A policy with an unlimited benefit period is the most expensive.
  

Many people choose a five-year benefit period because this coincides with Medicaid’s “look-back period.”

People who require long-term care but cannot afford it are eligible to have that care paid for by Medicaid. In order to determine that applicants for Medicaid are actually eligible, Medicaid will request the applicant’s financial records for the previous five years to ensure that the applicant has not given away or “hidden” any assets that could have been used to pay for care.

Some people choose to take out a long-term care insurance policy with a five-year benefit period so that they can give away their assets once they enter the nursing home, have the insurance policy pay for their care for five years, and then be eligible for Medicaid. Although this approach is legal in that it complies with current law, there is some debate as to whether or not it is ethical.