Long-Term Care Insurance: The Basics
Policies Can Protect Your Assets and Give You More Care Options
Millions of Americans already need long-term care, and the number is certain to increase as baby boomers age. Nursing home care can cost several thousand dollars per month and rapidly wipe out savings.
Medicare and Medigap supplemental insurance policies help pay for hospital care and physicians' services but do not cover long-term care. Medicaid does, but only low-income individuals can access it; people typically must spend almost all their assets before they qualify for coverage. And not all physicians or facilities accept Medicaid.
Long-term care (LTC) insurance is designed to help pay nursing home costs; some policies also cover long-term, in-home medical care. LTC insurance can help protect assets and increase a beneficiary's care options, should serious illness strike.
Purchasing an LTC insurance policy can be complicated and expensive. Seniors and caregivers need to assess their financial situation and weigh expenses against possible benefits.
Purchasers should pay special attention to policy riders and options. Policies with larger daily benefits and longer maximum benefit periods will offer greater protection but may cost significantly more. So will policies with home health care benefits and inflation protection.
Age is an important variable. For example, a policy that costs $1,200 a year at age 60 may cost close to $2,000 by age 65. Some comprehensive policies can cost $3,000 or $4,000 a year depending upon riders and benefit levels. And seniors who already have serious health problems may not be able to purchase an LTC policy at all.
These basic tips will help:
Find an agent you and the senior feel comfortable talking with, and don't let yourself be rushed. If an agent tries to pressure you into buying a policy before you are ready, look for another agent.
Look for an insurer with a strong financial rating and an excellent history of paying claims. Check with your state's insurance commission to see how much business the company does, how reliably it has paid claims in the past and how many consumers, if any, have filed complaints.
Don't be persuaded by low premiums alone. A company may offer low-cost policies, but if it has little history in LTC insurance, evaluating its record may be difficult. Annual premiums are not guaranteed to stay the same forever. Although an insurer can't raise a single policyholder's premiums individually, it can raise the premiums of an entire category of customers.
If you purchase an LTC policy, thoroughly read all paperwork and make sure you understand it. If you are not satisfied, return the policy within 30 days and ask for a full refund. Pay with a check, not cash, and keep copies of all paperwork.
Keep in mind LTC insurance is not only nursing home insurance. The better policies offer flexibility in allowing you to choose either a home care benefit or a nursing benefit. Again, read the policy, ask the salesperson and don't purchase until you are satisfied that you have all the information you need for your health, financial and family circumstances.
Don't be afraid to ask questions. Keep notes of all your conversations with the agent. Double-check and make sure everything you are told matches information in the policy once you get it.
As you proceed, these questions should help you and the senior compare policies:
How do the ratings of the various companies compare?
Is the price competitive?
Do the premiums increase as the beneficiary ages?
Are the premiums waived once the beneficiary is in a nursing home?
Is the policy renewable for life?
Is there a grace period for late payment?
What are the daily benefits? How do they compare to average actual costs in the area?
Is it necessary to have a hospitalization before benefits can begin?
Is there a waiting period before the policy starts paying benefits? If so, how long is it?
How much is the deductible? Does the deductible apply to every admission to a facility?
Is there an inflation clause mandating an increase in benefits as medical costs rise?
Does the policy cover at-home care? Does it cover skilled, intermediate and custodial care? Who decides when and if the home care benefit is triggered?
Is the coverage limited to nursing homes certified for Medicare?
Does coverage extend to physical therapy, home health aides, personal care and homemakers? Does it cover hospice care?
Contact your state insurance commission for information on insurance companies selling policies in your area. To obtain the phone number, check your phone book or contact:
National Association of Insurance Commissioners
2301 McGee, Suite 800
Kansas City, MO 64108-2604