Six Steps to Buying a Long-Term Care Insurance Policy

After just admitting my lack of knowledge on ETFs, I thought I'd follow that post with one in another area where I'm fairly clueless: long-term care insurance.

I'm clueless because no one I know has it. And I don't have it (though I may need it some day). So I thought I'd highlight this article from Kiplinger and share their six steps to buying a long-term care insurance policy. My hope is that we'll all learn something from it.

First, let's review why you might want to have long-term care insurance:

A private room in the average nursing home now costs $203 per day, according to 2005 figures from MetLife Mature Market Institute. That's up 5.7% from $192 per day in 2004. At those prices, even a brief nursing home stay could take a big bite out of your retirement savings, or destroy it entirely if you need care for several years.

Receiving 24-hour care at home can cost even more -- $456 per day or an average $19 per hour for a home health aide.

Buying a long-term care policy with a strong company is still the best way to protect yourself against potentially devastating nursing home costs.

Now, here are Kiplinger's six steps to buying a long-term care insurance policy:

1. Start with quality companies.

2. Compare companies' policies.

3. Find out how much coverage you'll need.

4. Add inflation protection.

5. Minimize the waiting period.

6. Pick the best benefit period.

The piece then ends with a couple pieces of advice I wanted to include:

Most people opt for a three-year or five-year benefit period, but it may be worthwhile to pay extra for a longer benefit period if you have a family history of Alzheimer's or some other chronic disease.

If you're trying to save money, Driscoll recommends shortening the benefit period rather than extending the waiting period.

I know this covers just the very basics, but it's a good start for learning about long-term care insurance. In the end, I have a lot more learning to do, but it seems like it's very similar to health and disability insurance. I guess it would be in many regards since they all deal with your physical well-being.

Anyone out there have long-term care insurance (or are using it now)? Any thoughts, comments, or words of advice for the rest of us?

Comments

[mapgirl]

Along with that, quit smoking now if you can. Because later on, the premium cost for life-long smokers becomes prohibitive and smokers will not be able to get LTC coverage. I speak from experience on this one. I got one parent with coverage and one without.

[Andrew]

This is a great post for some basic information about LTC insurance. I wanted to bring up several points to add to this discussion. LTC insurance is meant for middle income individuals not for the wealthy or lower income people. That being said if you have time on your side and/or have a decent discretionary income then consider building savings to pay for your future care. The money you are saving for retirement might not be all used so it can be applied toward paying for an assisted living home or nurse care at your own home. As baby boomers reach retirement LTC insurance becomes more important.

[MA]

Individual LTCi is medically underwritten so anything in your history can impact your issue class/premium.

LTCi is used by those who get the true experts advising them: designing ltci using a third-party owner with unlimited benefits, full refund of premium regardless of claims paid plus a 10-pay premium option is the choice among the business executives and owners I have talked with. Successful people know how to not only preserve wealth but max all the leverage available to them. Often their net worth is well over ten million dollars.

Since about 99% of people say the reason they purchase insurance is to get a claim paid, a buyer needs to go over a financial analysis of the companies offering the policy before they look at policies - what good is a policy if you can't get the claim paid. Using just the rating agencies without knowing whether a particular book of business is profitable and the margins the company earns is asking for disappointment.

Further, must read the actual policy especialy eligibility for claims and the exclusions: only one carrier who issues individual ltci does not exclude war/act of war - terrorism - so learn how to do your own due diligence - most experts either do not or cannot read financial statements...

Have a great day,
MA