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LTC Insurance Elimination Periods Guide -- Hollowtree blog
What the Elimination Period Means
The elimination period in a long-term care insurance policy is the number of days the insured must pay for care out of pocket before insurance benefits begin. It functions similarly to a deductible in other forms of insurance, but instead of a dollar amount, it is measured in days of care.
Standard elimination period options are 0 days (immediate benefit), 30 days, 60 days, 90 days, and 180 days. The 90-day elimination period is the most commonly selected option, representing approximately 60% to 70% of policies sold according to industry data.
The elimination period clock starts on the first day the insured receives qualifying care services or is certified as needing care. Depending on the policy, days may need to be consecutive or may be accumulated over a longer period. Calendar-day counting counts every day from the first qualifying care day, while service-day counting counts only days when care is actually received.
The distinction between calendar-day and service-day counting matters significantly. An insured receiving home care three days per week under a calendar-day policy would satisfy a 90-day elimination period in 90 calendar days (approximately 3 months). Under a service-day policy, the same person would need 90 actual care days, which at three days per week would take approximately 7 months.
Premium Impact of Different Elimination Periods
The elimination period has a substantial effect on premiums. Shorter elimination periods mean the insurer begins paying benefits sooner, which increases the expected claims cost and therefore the premium.
Using representative market pricing for a 55-year-old purchasing $200 daily benefit with a 3-year benefit period and 3% compound inflation protection, approximate annual premium differences across elimination periods might look like this. A 0-day elimination period costs roughly 30% to 40% more than a 90-day elimination period. A 30-day elimination period costs roughly 15% to 25% more than 90 days. A 60-day elimination period costs roughly 5% to 15% more than 90 days. A 90-day elimination period represents the baseline. A 180-day elimination period saves roughly 10% to 20% compared to 90 days.
The premium savings from choosing 90 days over 30 days might be $500 to $1,000 per year. Over a 25-year premium-paying period, this savings amounts to $12,500 to $25,000. Compared to the out-of-pocket cost during the elimination period, which at $200 per day for 90 days is $18,000, the lifetime premium savings roughly approximate the one-time elimination period cost.
This is the essential trade-off: you can pay a higher premium every year to have benefits start sooner, or you can save on premiums and plan to cover the first 90 days out of pocket if and when care is needed.
The Financial Calculation
To evaluate the elimination period decision financially, consider the expected out-of-pocket cost during the waiting period versus the cumulative premium savings over the life of the policy.
With a $200 daily benefit and a 90-day elimination period, the maximum out-of-pocket exposure during the waiting period is $18,000 (90 days times $200). This assumes full daily benefit-level care from day one, which may not be the case if care starts gradually.
If choosing the 90-day elimination period saves $800 per year in premiums compared to a 30-day period, and you pay premiums for 25 years, the cumulative savings is $20,000. You have saved more in premiums than the elimination period cost, effectively getting the shorter elimination period for free in expected value terms.
However, this analysis assumes you actually file a claim. If you never need long-term care (approximately 48% of people turning 65 today will not), the premium savings are pure savings with no offsetting elimination period cost.
The probability-weighted expected cost of a 90-day elimination period, considering both the probability of needing care and the probability of not needing care, is typically lower than the cumulative premium savings compared to shorter elimination periods. This is why financial advisors and insurance professionals generally recommend the 90-day option.
When Shorter Elimination Periods Make Sense
Despite the general recommendation for 90-day elimination periods, shorter waiting periods are appropriate in certain situations.
Individuals with limited liquid savings who cannot comfortably cover 90 days of care costs out of pocket should consider a 30-day or 60-day elimination period. If paying $18,000 for care before insurance kicks in would create genuine financial hardship, the higher premium for a shorter elimination period is a worthwhile investment in financial security.
Couples where both spouses have LTC insurance may opt for a shorter elimination period on one spouse's policy and a longer period on the other. If one spouse is more likely to be the caregiver during the other's elimination period, the caregiver spouse's policy might carry a longer elimination period while the higher-risk spouse's policy carries a shorter one.
Policies with home care benefits may warrant shorter elimination periods because home care is often the first type of care needed and is used at lower daily costs than facility care. A 30-day elimination period ensures that home care benefits activate quickly, potentially delaying or preventing the need for more expensive facility care.
When Longer Elimination Periods Make Sense
A 180-day elimination period is appropriate for individuals with substantial liquid assets who can comfortably self-fund six months of care and who want to minimize annual premium costs. The premium savings over the life of the policy can be significant, and the elimination period cost is a manageable one-time expense against a large asset base.
Some financial planners recommend a 180-day elimination period paired with a higher daily benefit amount or longer benefit period. The premium savings from the longer elimination period can be redirected to enhance other policy features that provide greater long-term value.
The Zero-Day Elimination Period Option
A zero-day or immediate benefit elimination period means the policy begins paying benefits on the first day of qualifying care. This eliminates out-of-pocket care costs entirely but comes at the highest premium.
Some carriers offer a zero-day elimination period only for home care while maintaining a 90-day elimination period for facility care. This hybrid approach recognizes that most care episodes begin at home and provides immediate financial support during the critical early days of a care event without the full premium impact of a zero-day elimination period for all care types.
The zero-day option is most commonly chosen by individuals who have experienced a family member's care event and understand firsthand that the first days of care are often the most chaotic and financially stressful. The peace of mind of immediate benefit activation has genuine value beyond the pure financial calculation.
Strategies for Managing the Elimination Period
Regardless of which elimination period you choose, planning for the waiting period improves the claim experience. Establishing a dedicated emergency fund equal to the elimination period cost ensures funds are immediately available when care begins. For a 90-day elimination period with a $200 daily benefit, this means setting aside $18,000 in an accessible account.
Coordinating with short-term care insurance, if available, can bridge the elimination period gap. Some carriers offer short-term care policies with benefit periods of 180 days to one year that can cover costs during the LTC elimination period.
Understanding the policy's specific elimination period provisions before a claim occurs prevents surprises. Review whether the policy uses calendar-day or service-day counting, whether the elimination period must be satisfied only once (most modern policies) or for each separate period of care, and whether the elimination period can be satisfied by informal care or only by paid professional care.
Contact Hollowtree for guidance on selecting the right elimination period for your situation.
The elimination period decision is ultimately about matching the policy design to your financial situation, risk tolerance, and planning preferences. It should be considered alongside benefit period selection and inflation protection when designing your coverage. The 90-day elimination period remains the most popular choice for good reason, but individual circumstances may warrant shorter or longer waiting periods. When paired with the right benefit period and inflation protection, a 90-day elimination period provides balanced protection and premium costs.
Written by
Cofounder Hollowtree Solutions & Marketplace. Executive MBA from Columbia Business School and London Business School, former attorney. Entrepreneur, investor, adviser.