Long Term Care Insurance
A long term care insurance policy can help pay for assistance with activities of
daily living such as bathing, eating, and dressing, as well as skilled nursing care
or rehabilitation, either in a nursing facility or at home. These policies have
several different options in paying for facilities, home health care and even informal
care provided by friends or family.
Long term care can get expensive but compared to paying for care – it can be a good
value. Because the premium is based upon age and health, it’s best to lock into
lower rates when you are younger. Additionally, insurance companies are under no
obligation to offer you coverage so you may not be able to find a policy if you
have a pre-existing health condition.
Here are a few standard elements of any policy:
- 30 day refund policy – you can cancel the policy within 30 days
for a full refund.
- Benefit limits - The length of time (such as 3 years or lifetime)
and maximum amount of coverage (such as $200,000) the policy will provide for.
- Benefit triggers – the events that must occur in order for benefits
to kick in. This is when you need help with at least two activities of daily living
[rollover: activities of daily living are defined as basic self-care functions including
bathing, grooming, dressing, toileting, eating, and transferring in and out of beds
and chairs.], your memory declines such that you need assistance or you need help
for a medical reason.
- Caregiver respite care – pays for when a family caregiver needs
to leave the home or needs a break.
- Guaranteed renewability – the insurance company cannot cancel your
policy for any reason as long as you pay your premiums.
- Lapse prevention – If you miss a payment or two due to a cognitive
or physical impairment, you have up to six months to catch up and reinstate the
policy.
- Waiting or elimination periods - The number of days you must be
disabled or incapacitated before the benefit begins.
- Waiver of premium – After you become disabled, your premium is
waived.
In order to buy a policy, first check to see if your employer offers long term care
coverage as a benefit. Next, ask an agent or broker for a quote. Accountants and
other financial planners may be able to recommend a good agent or broker. Compare
polices to find the one that’s right for you – you can
use our checklist.
When comparing policies, many people find the following policy features especially
important:
- No exclusions for pre-existing conditions
- Ability to downgrade without premium increase
- Insurance carrier’s high financial rating
- Inflation protection – generally this is an additional rider that protects your
daily benefit amount by increasing with the pace of inflation. It may be based upon
different inflation rates (consumer price index versus medical costs) and you can
usually select simple or compound protection. The older you are, the less you need
to worry about this option.
- Non-forfeiture benefit - If you stop paying your policy, you may still be able to
receive some of the benefit from previously paid premiums.
- Restoration of benefits – Most plans have a maximum limit they will cover. With
this rider, if you recover from an illness or injury where you drew upon benefits,
the full maximum is restored.
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Advantages |
Disadvantages
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Covers some or most of the different types of long term care services, including
custodial or personal care.
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Monthly premiums can get expensive particularly for older adults. You might not
be able to continue to pay the monthly premium.
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Lets you choose the type of coverage and customize your care based on your needs.
You will have greater control over how, where, and by whom long term care is provided.
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You can’t predict exactly what kind of care you or your loved ones will need. Even
if you buy long term care insurance, you may have to pay additional long term care costs.
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Your family or friends won't have to worry about how your long term care will be
funded. You may reduce the burden on family members when you need care.
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You might not be able to purchase a long term care insurance policy due to an existing
health problem. (This may not apply when enrolling in coverage with your employer
during predetermined specific times.)
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By enrolling in your company’s benefit, you can take advantage of group rates that
may be lower than individual rates.
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You’re less likely to need to use your savings or life insurance to pay for your
healthcare needs, thereby protecting your retirement assets and those of your spouse.
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