These are just a few of the reasons why long-term care insurance is one of the most important purchases you will ever make.
Long-term care insurance policies can be complicated and even the smallest details can have a huge impact on how much care you receive. It is important to review a range of policies and ask questions. Your broker or agent can also help you understand the details of each policy.
These 12 questions will help you understand the complexities of long-term care policies and provide the information you need to make an informed decision about whether or not you should shop for one.
Why should you buy long-term insurance?
Many elderly people are unable or unable to take care of themselves due to a cognitive or physical disease. Long-term care insurance may cover in-home care, nursing homes, assisted living facilities and other services that are essential for our daily lives. It is not medical insurance. It is for daily living functions.
However, it is not just for the elderly. A policy may provide coverage for life if a person in their 30s purchases long-term insurance.
What happens if I’m sick and don’t have insurance?
A person who is not insured and in need of a nursing home would have to pay for the cost of the facility out of their assets. Government assistance will not usually kick in until the spouse’s assets are almost exhausted. Anyone with assets to protect might want to think about this insurance.
What age should long-term insurance be purchased for long-term care?
Sometimes, it is recommended that seniors 60+ should look into this insurance. There are several reasons to reconsider this advice and instead consider purchasing it as soon as you can.
The first reason is that a life-altering event can happen at any age, as mentioned above. You could be paralysed at 30 and need to receive life support for the next 60. You could be covered. It’s too late if you don’t have insurance.
The second, and less obvious reason is that buying the policy when you are younger may be less expensive than buying it later in life. This includes inflation. Ask your financial advisor to help you compare the purchase of this policy now and when it is due for purchase at 60. It may be that the numbers are more favorable if you buy now.
Where can I shop?
After you have made the decision to buy long-term care insurance, it is time to start shopping. Although there are many large insurance companies that provide the insurance, it is worth looking into independent brokers.
Clay Cotton, a former broker and founder of the National Advisory Council for Long Term Care Insurance was founded in 1996. Ironically, Cotton was 53 years old when he was diagnosed in 1997 with multiple sclerosis. He was already preparing to purchase this insurance, but had not yet done so. Now, he’s ineligible. However, he did purchase a policy to cover his wife Suzanne who was soon diagnosed with hepatitis.
Cotton supports independent brokers for purchasing insurance. He has a list of them listed on his website. This is in contrast to agents who are tied to one company and whom he calls “captive agents”.
Cotton advises, “Avoid captive agents.” They can only sell their company’s party line. Agents can only sell you their company’s party line if they don’t offer favorable terms on things like the maximum deductible.
Cotton recommends that consumers also read the “Shopper’s Guide to long-term Care Insurance” by the National Association of Insurance Commissioners. This booklet is available to all insurance brokers and agents who sell this insurance.
Long-term care insurance is expensive. This number can fluctuate based on many factors, including age. The insurance policy may be affordable for people in their 30s. However, it can cost as much as $400 per year for people in their 50s and 60s.
What kind of coverage does the policy offer?
Although the policy wording will vary, there are three main categories of care that may be covered: skilled nursing facility, assisted living, and home settings. Since you don’t know what you might need, the ideal policy would cover all three. It is possible to end up with a condition that can be managed at home. However, if your policy only covers nursing home care, then you might be out of luck or forced into a nursing facility prematurely.
If you are only covered for assisted living and home care, your chances of getting full-time skilled care are slim.
What is the payout time of the policy once it is triggered?
While an unlimited payout is the best, there are policies that provide coverage for shorter periods of time such as four or six years. It’s important to consider your financial resources and how much gambling you are willing to do. The better the coverage, obviously.
What is the trigger for the policy?
Different policies require different reasons for the policy’s to be in effect. These include cognitive impairment, impairment or impairment that makes it difficult to do daily activities and medical impairment. Some policies do not allow for all circumstances, and others refuse to accept medical necessity as a trigger. You should understand the trigger of your policy and find one that includes medical necessity.
Some policies also require that you be admitted to a hospital before any home- or nursing home care benefits can kick in. This restriction should be removed from your policy.
What is the daily payoff?
Some policies cover expenses up to $50 per day or $75 per night, while others cover expenses up to $200. Each policy is different. You should ensure you understand all aspects of the coverage you are considering. Consider the differences in nursing home costs depending on where you live. A nursing home in New York might cost $300-400 per day, while one in the Midwest could be as low as $100.
What is the deductible?
This is where things get complicated. These policies may not measure the deductible in dollars but in days. The policy’s deductible can be 30 days, 60 days or 120 days. Depending on the policy, the length of the deductible may refer to different things. You may have consecutive days or none. Your ability to pay your own expenses until the policy starts will determine which deductible is right for you.
Before you sign up, make sure to fully understand the deductible and compare it with your future assets. This is a topic that you should discuss with your financial advisor.
Is the policy inflation-protective?
Many policies have a clause that increases your benefit in the event of inflation without increasing your premium. Ask about it.
Is your policy open to shared care?
Some policies let you link your policy to your spouse’s so that, if you lose your coverage, you can still draw on the coverage of your spouse. If this is something you are interested in, talk to your spouse.
Before signing up, make sure you understand all aspects of the policy.
