Learn About Long-term Care Insurance

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Many people don't want to think that they may someday need long-term care and they don't plan for it. Others assume, incorrectly, that Medicare or their health insurance policies will cover the costs. But every year, this failure to plan for the future costs thousands of American families their life savings. The best time to plan for long-term care is before it becomes necessary.

Who is Long-term Care Insurance for?

Long-term-care insurance is an option for people who qualify medically and who can afford the premiums. Because premiums are based on your age at the time of purchase, the younger you are when you purchase a policy, the less expensive the annual premium. Some experts recommend buying the insurance at age 65 if you have significant assets you want to protect, and if you can afford an annual premium of around $1,500. Long-term care insurance isn't suitable for people with few assets who can expect Medicaid to cover a nursing-home stay, or for individuals who might have to sacrifice more immediate needs to pay the high premiums.

What should I consider before purchasing LTC insurance?

Before purchasing LTC Insurance consider these major factors:

• Qualifying Conditions – many policies require you to have an acute medical condition before you can qualify for benefits. The best policies are not contingent on an acute medical condition: they will pay for the long-term care of a person with a physical or cognitive impairment.
• Daily Benefit – the maximum fixed dollar amount that a policy will pay each day. You usually can select between $50 and $250 per day.
• Benefit Period – the length of time you will be eligible to receive payments. You can select a specific number of years or a lifetime plan, which will be more expensive.
• Waiting (Elimination) Period – the number of days before the insurance begins to pay for your care. Most plans have a variety of options. The elimination period may be once in a lifetime or it can repeat. The longer the waiting period, the lower the premium.

There are also optional features that may be included in your plan, all of which will increase your annual premium:

• Inflation Protection – increases the value of your daily benefit (usually by 5% per year), allowing it to grow on an annual basis to help keep up with inflation.
• Home Health Care Coverage – allows you greater choice by covering community care like Adult Day Care Centers and Assisted Living Facilities as well as Home Care Services.
• Nonforfeiture – this option provides some form of paid-up benefit if the policy should lapse.

How do I start?

Some experts recommend that you start by selecting an excellent company; look at their top plan, then eliminate those features you don't need. Call your state insurance department and ask about the company and its record. Check with insurance rating services to make sure the company you're considering is financially secure. You can find these rating services online, or you may call Moody's at 212-553-0300, or A.M. Best at 908-439-2200.

Keep in mind you won't get better pricing without increased risk or reduced benefits. If you're quoted a much lower price, it may be that the plan is from a "substandard" company, or the company is using "first lowball, then raise rates" tactics, or it simply provides less coverage.

Before you purchase any policy, review the details and options. Don't rely on the marketing materials or outline of coverage. Make sure you understand all the provisions. Ask your insurance agent questions. Contact the Area Agency on Aging, or local senior centers. Don't allow yourself to be pressured into making a quick decision. And remember: never pay cash.

After purchasing a policy, you usually have 30 days to review it. You may cancel the policy for a full refund during this time. For a detailed list of things to consider in selecting a policy, see Getcare's Long-term Care Insurance Checklist.