The client can surrender the contract at any time and would be guaranteed to receive back 80% of the original premium deposit.
Clients are essentially buying two pools of money:
1) Base LTC Benefit/Death Benefit pool
2) Extension of Benefits pool
The base contract has a two year benefit period for long term care. If never used, the entire pool is paid out as Death Benefit.
The client can choose to add a coverage extension rider that extends the coverage for either two or four more years.
When a client goes on claim, they start deducting from the first pool, which is also their death benefit. Should the client use this full benefit, there is still a guaranteed residual DB (usually 10%) that will pay out to the beneficiary. At this time, the second pool of money will activate and LTC coverage will continue.
In NY, only the Extension of Benefits Rider can include an Inflation Protection provision, up to 5%.
Outside of NY, the Inflation Protection provision can cover both the first two years of coverage (base benefit) and the Extension of Benefits Rider.
Depending on carrier, monthly LTC benefits will be a reimbursement or indemnity product.