How to Buy Long-term Care Insurance: What Every Policy Should Include

The following is a guest post from Genworth Financial and is a follow-up to their post titled Long-term Care: What are the Options?

I recently wrote about the options available when considering long-term care, and four general ways it can be paid for. Now I’d like to do a deeper dive into some of the basics you should look for when you’re thinking of purchasing a long-term care insurance plan (LTCI). There are standards that every policy should uphold as well as additional, more personal considerations to take into account.

A long-term care insurance policy is a contract, and it would be a mistake to consider marketing materials in place of actual documents. It’s a good idea to talk to an agent or producer so that you can explore your options. The session should be free and without obligation. Be prepared to discuss your family, your assets and your health. Look to work with someone who’s willing to personalize your policy, who will listen to your concerns and help you get where you want to be.

Consider both the policy under discussion as well as a “shopper’s guide to policies” so that you can see the bigger picture. Ask to see the company's financial rating and a summary of each policy's benefits or an outline of coverage. And know that every state has an insurance regulatory department to aid the consumer.

Here are the key points that your policy should include:

• One year of care coverage at the very least (nursing home or home health care should not be limited to skilled care – give yourself options). This should also include intermediate and custodial care.


• Coverage for Alzheimer's disease (if developed after purchase of plan). Consider this startling statistic from the Alzheimer’s Association: about 5.4 million Americans have Alzheimer’s disease; this translates to one in every eight Americans age 65+, and nearly half of Americans aged 85+. This is an important clause in any policy.


• An inflation protection option to either 1) automatically increase the initial benefit level on an annual basis or 2) guarantee the right to increase benefit levels periodically without providing evidence of insurability.


• “Outline of coverage" describing all benefits, limitations, and exclusions.


• A comprehensive guide of all plans available provided by the company so that you can compare policies and determine what meets your needs best.


• Guarantees that the LTCI plan will be there for you when you need it most; the policy should not be permitted to be canceled, non-renewed, or terminated by the company just because you are getting old and are experiencing mental or physical problems.


• Ability to return the policy and receive a premium refund; you should have 30 days to be able to reconsider in what is called a “free look” period.


• Policy purchasers should not have to fulfill preexisting conditions before being able to opt for a plan (preconditions to look out for include hospitalizations or care of any kind).

As you venture into the long-term care insurance policy marketplace, it’s useful to educate yourself about the costs of care in your state. Know the breakdown by type of care and facility. It’s good to know whether the kind of care you’ll need is going to be both available and financially feasible.

Comments

[BHansen]

Since these policies are being sold by private companies, what happens if they go out of business after you have been paying in for years?

[Jim]

Bhansen, Insurance companies vary rarely fail and they are heavily regulated. Banks fail like 5-10 times as often as insurance companies. If an insurance company does fail then state guarantee associations step in to pick up the pieces and guarantee some coverage. Its kinda similar to how FDIC protects bank deposits. Long term care insurance is typically covered by guarantee associations as a form of health insurance with cap of coverage up to $100k benefits. When an insurance company fails another insurance company may buy the assets and policies out for a bargain price, so you could just end up having your policy transferred to another company.

[ChipsMoneyTips]

In my dad's case, we got lucky. He moved into the nursing home a month before I got the notice stating his premium was going up. We did not have to pay the premium once we started using the LTCI. My dad used the insurance for 2+ years and it saved us well over $100K.

The letter said the premium was going up or we had the option to keep it the same but have the daily benefit lowered from $150 to $110, as I recall. I do not have the letter in front of me, but the change was significant. Thankfully, we got in under the wire.

I had LTCI for myself and cancelled it after two years when I realized the premiums would probably get too expensive before I could even use the insurance...

Eight years in a nursing home ran my mom $500,000. When my dad saw how expensive it was, he got LTCI from a company that was eventually bought out by Genworth. We never had a problem with Genworth. My issue with LTCI is that they will not guarantee that your monthly premium will stay the same...

If you run out of money, Medicaid will pay the nursing home for you. I am not optimistic about the possibility of that being there in 20-30 years for me. My plan is to stay engaged in life. I also must acknowledge that there may come a day when I will need 24/7 help, and have help live in my home. A buddy of mine accomplished this by having three medical students and part time nurses stay in his home, in shifts. They spent most of the time studying, but were there when his dad needed anything.

What a drag, it can be, getting old.

[Sapper]

In Jim's reply to Bhansen, the operative words are 'rarely', 'some', 'up to', 'may' and 'could'. These are not reassuring words, so choose your LTCI provider VERY carefully!

[Jim]

Sapper, yes it certainly makes sense to be careful and pick a highly rated insurance company.

Here's a site with some of the top rated LTC insurance providers (including Genworth) :
http://www.aaltci.org/long-term-care-insurance/learning-center/company-ratings.php