I have many clients who have long term care insurance, and many who don't. From what I've seen, my clients with long term care insurance have many more options when it comes to choosing care and choosing where they live than my clients who don't. The New York Times has a recent article about how to choose a long term care insurance policy.
One of the first questions people always ask about long term care insurance is "how much does it cost." The costs vary widely depending on the age you are when you obtain the policy, how much the policy will cover (they usually cover a certain dollar amount per day) and how long the policy will pay for care. Other policies may give you a "bucket" of money and your coverage lasts until it is gone.
Long term care insurance covers things that traditional Medicare and health insurance don't - medical care in the home, longer term care at a nursing home, and even pay for assisted living costs.
The time to start looking into policies is in your 50's, since the premiums will be lower than if you start later, and there is less of a chance that you will suffer from a health problem that could cause your premiums to be extremely high or prevent you from getting coverage all together.
A long term care insurance policy will kick-in when the policy holder is unable to perform one or more activity of daily living (bathing, dressing, eating, walking). Check your policy since they can vary in terms of how many ADLs you must be unable to perform before coverage will start.
Things to look for in a policy:
- Where can the care be provided? Home, nursing home, assisted living. Most people want flexible options.
- What types of caregivers can be paid by the policy? The article recommends a policy that covers
"skilled, intermediate and custodial care,” which would include someone who could assist with laundry and meal preparation.
- What illnesses are covered? Be sure that illnesses such as Alzheimer's aren't excluded from coverage, which was common in some of the older policies. Read the list of exclusions on any policy before you buy it.
- Does the policy provide inflation protection? What seems like adequate coverage now, may not be what you need in 20 or 30 years if it doesn't keep up with inflation.
To control the costs of the policy, the article has the following tips:
Avoid lifetime benefits. Opt instead for a policy that covers a set amount of time, like four or five years, suggests Ms. Driscoll. The average nursing home stay is two to three years, she points out, and only 12 percent of patients live longer than five years once they enter.
Look for a policy that pays a monthly sum. Most policies specify a daily benefit — anywhere from $50 to $500. Recently insurers have begun using a monthly amount so you have the flexibility to receive more care on some days, when no family member is available, for example, and less care on others.
Consider a front-loaded policy. With these, you pay the entire cost of the premiums before you retire. You’ll pay more upfront, but payments will end just as your income decreases.
Look into cash benefit policies. Once benefit payments kick in, these policies will send you a regular cash payment, say $200 a week. Instead of filing claims for specific care (with specific requirements to qualify for coverage) you are free to use the payout however you see fit.
You may still pay the nursing home or home health care attendant with the money when the need arises. But you can also use the cash to pay a family member for care, pay travel expenses for a visiting relative and take care of other expenses that would not be reimbursed under a traditional policy. You’ll pay more for these policies, but some families find the extra flexibility is worth it.
Find a good agent. You’ll need someone who is experienced in long-term care, Ms. Driscoll says. This might be the same insurance agent who sold you your life and auto policy, or you may need to find a specialist. Either way, make sure the person fully understands your needs and is active enough to be selling at least a dozen policies a year.
Paying for in-home or nursing home care privately can often exhaust a person's resources leaving them far fewer options when their funds run out. By obtaining long term care insurance, a person often can remain in their home far longer than without the insurance, and make sure that a spouse or other family member doesn't become impoverished by the cost of care. In addition, many people find that it allows them to preserve assets to pass on to the next generation, and that it fits in well with their overall estate plan.