Long Term Care Insurance – Part II

Last week, I discussed the rising cost of long term care and the importance of having a plan in place. This week, I will explain what options you should look for when purchasing a policy and which are the best long term care insurers.

Once you’ve decided to purchase a policy, the first step you should take is to find a reliable company that is licensed by your state of residence to sell long term care insurance. Notable big players in this field include Prudential, John Hancock and MetLife, among others. You will need to compare the costs, benefits, and options of each of the policies to find the one that best fits your particular needs and wants. Policies may cover all, some or only one of the following services: nursing home, assisted living facility, adult day care, and/or in-home care. You must decide which type of facility you would use and make sure the policy provides benefits for this type of service and facility.

The amount of daily benefit available typically ranges from $50 to $400 per day. It is important that you find out the current cost of care in your area before deciding on the appropriate benefit amount. Often, people will choose to self-insure a portion of the expected costs of long-term care. You will also need to decide how long you want benefits to be paid. Most insurance companies offer payment periods of 2 years to lifetime. Note that the average nursing home stay is less than 3 years.

Also, companies have different ways of paying out benefits to their customers. This is an important factor to consider when you make your decision. There are three different ways that companies pay benefits.

  • The reimbursement plan pays the actual cost incurred and will not reimburse for services by non-licensed caregivers.
  • The indemnity plan pays the full daily benefit regardless of actual expenses, and again, the care provider must be licensed.
  • The cash benefit plan pays the full daily benefit regardless of actual expenses and regardless of whether the caregiver is licensed. This plan allows you to receive cash benefits even if your caregiver is a family member.

You must also decide how soon you want to begin receiving your benefits (the elimination period). Most companies offer elimination periods that range from 30 days to 360 days. Look carefully at your finances and choose the longest elimination period that is appropriate for your situation in order to reduce your premiums.

There are numerous options that can be added to enhance your policy. Here is a partial list you may want to consider:

  • Inflation Protection Rider will cause your daily benefit to rise each year based on your choice of either simple or compound inflation factor. With healthcare costs rising steadily, this may be your most important option to consider.
  • Future Purchase Option Rider offers policyholders the ability to purchase additional insurance in later years if they feel it is necessary. This is a safeguard but the major disadvantage is that the premiums of the new insurance are based on your current age, which can be very expensive.
  • Shared Care Rider Option Rider offers policyholders the ability to borrow from their spouse’s policy once their policy is exhausted.
  • Survivorship Rider provides a paid up policy for a surviving spouse once a policy has been in-force for a certain number of years. This is appropriate where the death of one spouse causes family income to drop to a point where it would be difficult for the surviving spouse to continue to pay premiums.

As you can see long-term care insurance is a complex product. To be certain that you purchase a policy that fits your particular needs, contact your financial advisor or someone who specializes in long-term care insurance. To find a specialist near you, log onto www.ltc-cltc.com or call 1- 877-771-2582.

My thanks to my associate Kimberly Reynolds and LTC specialist Babs Hart for their assistance with this article.