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Inside this Article
What
Features Of Long-Term Care Policies Should I Focus On?
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There are various questions and
issues to keep in mind when choosing a long-term care policy.
Where May Care Occur?
The best policies pay for care
in a nursing home, assisted living facility, or at home.
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Benefits are
typically expressed in daily amounts, with a lifetime maximum. Some
policies pay half as much per day for at-home care as for nursing home
care. Others pay the same amount, or have a "pool of benefits"
that can be used as needed.
Under what conditions will
the policy begin paying benefits?
The policy should state the various conditions that must be met.
- The inability to perform two or three specific
"activities of daily living" without help. These include
bathing, dressing, eating, toileting and "transferring" or
being able to move from place to place or between a bed and a chair.
- Cognitive impairment. Most policies cover stroke
and Alzheimer’s and Parkinson's disease, but other forms of mental
incapacity may be excluded.
- Medical necessity, or certification by a doctor
that long-term care is necessary.
What events must occur
before the policy begins paying benefits?
- Some older policies require a hospital stay of at
least three days before benefits can be paid. This requirement is
very restrictive; you should avoid it.
- Most policies have a “waiting period” or
"elimination" period. This is a period that begins when
you first need long-term care and lasts as long as the policy
provides. During the waiting period, the policy will not pay
benefits. If you recover before the waiting period ends, the policy
doesn’t pay for expenses you incur during the waiting period. The
policy pays only for expenses that occur after the waiting period is
over, if you continue to need care. In general, the longer the
waiting period, the lower the premium for the long-term care
policy.
How long will benefits last?
A benefit period may range from two years to lifetime. You can keep
premiums down by electing coverage for three to four years—longer than
the average nursing home stay—instead of lifetime.
Indemnity vs. Reimbursement
Most long-term care policies pay on a reimbursement (or expense-incurred)
basis, up to the policy limits. In other words, if you have a $150 per
day benefit but spend only $130 per day for a home long-term care
provider, the policy will pay only $130. The “extra” $20 each day
will, in some policies, go into a “pool” of unused funds that can be
used to extend the length of time for which the policy will pay
benefits. Other policies pay on an indemnity basis. Using the same
example as above, an indemnity policy would pay $150 per day as long as
the insured needs and receives long-term care services,
regardless of the actual outlay.
Inflation protection
Inflation protection is an important feature, especially if you are
under 65, when you buy benefits that you may not use for 20 years or
more. A good inflation provision compounds benefits at 5 percent a year.
Without inflation protection, even 3 percent annual inflation will, over
24 years, reduce the purchasing power of a $150 daily benefit to the
equivalent of $75.
Six Other
Important Policy Provisions
1=7 Elimination
period. Under some policies, if the insured
has qualifying long-term care expenses on one day during a
seven-day period, he or she will be credited with having satisfied seven
days toward the elimination period. This type of provision reflects the
way home care is often delivered—some days by professionals and some
days by family members.
Guaranteed renewable policies
must be renewed by the insurance company, although premiums can go up if
they are increased for an entire class of policyholders.
Waiver of premium, so
that no further premiums are due once you start to receive benefits.
Third-party notification, so
that a relative, friend or professional adviser will be notified if you
forget to pay a premium.
Nonforfeiture benefits keep
a lesser amount of insurance in force if you let the policy lapse. This
provision is required by some states.
Restoration of benefits,
which ensures that maximum benefits are put back in place if you receive
benefits for a time, then recover and go for a specified period
(typically six months) without receiving benefits.
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