Which Type of Policy Pays Benefits to a Policyholder

There are several types of policies that pay benefits to policyholders, but not all of them do.

A term life insurance policy pays a death benefit to the beneficiary if the policyholder passes away during the term of the policy.

A permanent life insurance policy also pays a death benefit, but in addition, it can accumulate cash value over time.

The cash value of a permanent life insurance policy can be borrowed against or withdrawn by the policyholder.

There are several types of policies that pay benefits to a policyholder.

Some policies have an elimination period, which can be as short as seven days. If the insured has qualifying long-term care expenses on one day during a seven-day period, they will be credited with having satisfied seven days toward the elimination period.

Guaranteed renewable policies must be renewed by the insurance company, but premiums can increase if they are increased for an entire class of policyholders.

Waiver of premium is a provision that allows no further premiums to be due once benefits start being received. This can be a huge relief for policyholders who are already dealing with the stress of long-term care.

Nonforfeiture benefits keep a lesser amount of insurance in force if the policy lapses. This provision is required by some states, so it's essential to understand what it means for your specific policy.

Here are some key features of different types of policies:

Restoration of benefits is another provision that ensures maximum benefits are put back in place if the policyholder receives benefits for a time, then recovers and goes for a specified period (typically six months) without receiving benefits.

Long-term care insurance can cover a range of care services, including care in a facility, home care, and hospice services. There are three main types of policies: Nursing Facility and Residential Care Facility Only, Home Care Only, and Comprehensive Long-Term Care.

The California Partnership for Long-Term Care offers a special type of long-term care insurance policy that must meet certain requirements. These policies, known as "Partnership" policies, have benefits to cover care and automatic inflation protection.

Partnership policies require special training for insurance agents to sell and advise on. You should confirm that your agent has this certification before purchasing a policy.

To get benefits from a policy, you must meet certain conditions. The policy will pay out if you're unable to perform two or three specific activities of daily living without help, such as bathing, dressing, eating, toileting, and transferring.

These activities are crucial for daily life, and if you're unable to do them on your own, the policy will kick in. Cognitive impairment, like that caused by stroke, Alzheimer’s, or Parkinson's disease, is also covered by most policies.

Medical necessity is another requirement for benefits, which is certified by a doctor who confirms that long-term care is necessary.

Some life insurance policies offer a Partial Benefit Payment option, which can be a lifesaver for those struggling with a terminal illness.

This option is often made possible by an Accelerated Death Benefit rider, which is an optional provision that allows policyholders to access part of the death benefit while they're still alive.

The company may require Proof of Life Expectancy from a medical provider to accelerate the death benefit.

Sums paid out through this option will typically reduce the amount disbursed to beneficiaries after death.

Home Care Coverage is a vital aspect of long-term care insurance policies. Every policy that includes Home Care Only or Comprehensive Long-Term Care must provide at least six essential benefits.

Home Health Care is a crucial benefit that allows skilled nursing care or professional services to be provided in the comfort of your own home. This can be a huge relief for those who need medical attention but prefer to stay at home.

Adult Day Care is another benefit that provides medical or social care in a licensed facility during the daytime. This can be a great option for those who need personal care, supervision, and assistance with daily activities.

Personal Care is assistance with daily activities such as bathing, dressing, and taking medications. It's essential to note that this benefit also includes Instrumental Activities of Daily Living (IADLs) like using the phone, managing medications, and shopping for essentials.

Homemaker Services are designed to help individuals remain in their homes by providing assistance with daily tasks and activities. This can include light housekeeping, laundry, and meal preparation.

Hospice Services are available for those diagnosed with a terminal illness, providing physical, emotional, social, and spiritual support in the comfort of their own home. Some policies may also cover these services in an institutional setting.

Respite Care is short-term care that can be provided in a nursing facility, at home, or in a community-based program. This is designed to give primary caregivers a much-needed break and some relief from their responsibilities.

When you're shopping for long-term care insurance, it's essential to understand the policy provisions that can make a big difference in your coverage.

Some policies offer a provision that credits you with seven days of qualifying long-term care expenses if you have any on a single day during a seven-day period. This is often the case when receiving home care, where some days are spent with professionals and others with family members.

Guaranteed renewable policies require the insurance company to renew your policy, but premiums can increase if they're raised for an entire class of policyholders.

A waiver of premium provision is a nice benefit, as it means no further premiums are due once you start receiving benefits.

You can also opt for third-party notification, which alerts a relative, friend, or professional adviser if you forget to pay a premium.

Some states require nonforfeiture benefits, which keep a lesser amount of insurance in force if you let the policy lapse.

Restoration of benefits ensures that maximum benefits are put back in place if you receive benefits for a time, then recover and go without benefits for a specified period (typically six months).

If your policy waives the premium, you'll want to know how it's waived. The policy will specify how the waiver applies, whether it's to all benefits or just nursing home care.

You should receive detailed documents explaining the waiver, even if you decide not to purchase the policy that day. This way, you can review and understand the terms before making a decision.

The documents will likely address what happens to any premiums you've already paid. This is an important consideration, as you'll want to know if you'll be getting a refund or if the waiver will be applied to your existing payments.

Here are some key questions to ask if your policy waives premium:

Policyholders with terminal illnesses can access part of the death benefit amount while they are still alive, usually to help pay for needed care, through an Accelerated Death Benefit rider.

This benefit can be paid out before death, but the company may need proof of life expectancy from a medical provider. The sums paid out will typically reduce the amount disbursed to beneficiaries after death.

Some long-term care policies have a waiver of premium provision, which means no further premiums are due once you start to receive benefits.

Other policies have a nonforfeiture benefit, which keeps a lesser amount of insurance in force if you let the policy lapse, a provision required by some states.

Policyholders may also have the option to restore benefits if they receive benefits for a time, then recover and go for a specified period (typically six months) without receiving benefits.

Here are some other important policy provisions that can benefit policyholders: