Last Updated: November 10, 2008
If you're looking to purchase a long-term care insurance policy, Marilee Driscoll, founder of Long-Term Care Planning Month, recommends the following when evaluating a policy:
- Is the policy comprehensive, covering care in any setting? Does it cover home care, assisted living and nursing home care, for instance?
- Is the daily benefit, the maximum that you are eligible to collect each day, high enough?
- Will the daily benefit automatically increase with inflation, and, if not, do I understand that I am responsible for any shortfall? Policies without inflation protection may be worthwhile starter policies, but the insured bears the burden of any shortfall, so periodic reviews are important.
- Is the 'Elimination Period' too long? Understand exactly how the elimination period is satisfied (usually by paying for care personally), and make sure that you have the money to satisfy the elimination period, any additional time due to paperwork delays or administrative processing. Also, remember that you may need help for awhile before you can even trigger benefits. For example, you may need help shopping, cooking and balancing your checkbook before you are "far gone" enough to need help with Activities of Daily Living (ADL).
- If you live in a "Partnership" state, is your Policy Partnership certified? If so, you may be able to have the government Medicaid program pay for your care when your policy is exhausted, while being able to preserve assets that otherwise would need to be spent on your care.
Now, if you want to keep the cost of long-term care insurance premiums down, Driscoll suggests the following tactics:
- The smartest way to trim costs is to shorten a policy's benefit period to three years instead of five years, for example. Most claims last well under five years, and by using the policy to pay first you:
a. Keep your retirement savings intact for your family in the event of a short claim
b. Delay using your retirement savings for a long claim
Any unused daily benefit waits for you and extends the time that your policy pays out. A Milliman actuarial study estimates that only about 7 to 8 percent of 70-year old claimants will have claims that last beyond five years. - Don't delay the purchase of a policy. If you develop health problems before you lock in a policy, you will not qualify for preferred health discounts. If your health is considered far below what a company likes to see, some will charge you an extra surcharge (called a rating) for your coverage and most insurers will outright decline the application because they do not offer rated policies.
- Ask if you and your spouse, significant other, or relative living under the same roof are eligible to share a policy. Joint policies, shared policies, or linked policies allow multiple insurers to tap into one benefit pool. This allows you to maximize the amount of benefit available to any individual, with the tradeoff being that once one person uses some benefit, those same dollars can't be reused. So, two people may choose to have two five-year benefit period policies with a rider allowing them to access each five-year benefit, instead of each purchasing lifetime benefit periods. The two five-year linked policies would be less expensive, and would provide a total of 10 years of benefits.
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