Whenever I start thinking about long-term care insurance, my immediate next thought is: “Don’t I have something else I need to be doing this afternoon?”
Long-term care insurance is still a pretty non-standard insurance product, so there are a huge number of variations from one policy to another.
Fortunately, the folks at Medicare.org (a private organization, not part of the federal government) have provided a roadmap for comparing policies.
They recommend that once you’ve got a short list of insurance companies, you take a look at a specific list of policy benefits so that you can start to compare the offerings. Start by asking each company for a sample policy.
“Each sample should include an Outline of Coverage section at the beginning of the policy,” according to Medicare.org. “This section briefly summarizes the policy’s benefits and highlights the major features. After you read this section, read through the entire policy to make sure you understand all of the provisions.”
Here are some key items to look for:
- Waiting period: This is the period of time that must pass before the insurance company will begin to pay benefits. It can be anywhere from 0 to 365 days. You’ll be asked to select a waiting period–the shorter the period, the more the policy will cost.
- Duration of benefits (known as the benefit period): You’ll also be asked to select a benefit period (e.g., two years or a lifetime)–the longer the period, the more costly the policy. Watch out for caps placed on the total lifetime benefits you can receive if the policy lets you carry over unused daily benefits beyond the scheduled benefit period.
- Nursing home and home health-care daily benefit: This is the amount of coverage you select as your daily benefit limit (e.g., $50, $200).
- Cost-of-living rider: This feature provides protection against loss of purchasing power due to inflation. It increases your coverage every year to keep pace with inflation (either based on the Consumer Price Index or at a fixed percentage rate).
- Range of care: A policy may provide coverage for different levels of care, such as skilled, intermediate, and/or custodial. A good policy should cover all levels of care.
- Pre-existing conditions: A waiting period (e.g., six months) may be imposed before you can receive coverage for any pre-existing conditions you might have.
- Other exclusions: Some policies may not cover certain medical conditions (e.g., Alzheimer’s or Parkinson’s disease). Others may specify that you have to be in certain types of facilities.
- Premium increases: Some policies may have a level premium for the period that the policy is in effect. In other cases, the premium may increase during the policy period.
- Waiver of premium: Most policies waive your premium after you’ve received benefits for a certain number of days, but sometimes only if you’re receiving care in certain types of facilities.
- Guaranteed renewability: Most policies give you the option to renew the policy and maintain your coverage, despite any changes in your health.
- Grace period: Most policies give you a grace period if you’re late with a premium payment (usually 30 days). This means that the policy will remain in effect during that period.
- Restoration of benefits: This is a feature that restores your benefits if you recover from your condition and do not require care for a consecutive period (e.g., 180 or 365 days).
- Return of premium: You may be entitled to a return of premiums paid (or a nonforfeiture of benefits or a continuation of benefits for a limited period of time) if you cancel your policy after paying premiums for a number of years.
- Prior hospitalization: Some policies require a hospital stay before you can qualify for benefits under the policy. This requirement is less common than it used to be, and you should probably avoid policies that include this provision.
How do the policies you’re considering stack up against each other? Which benefits and features mean the most to you? How much can you customize each policy to your needs? These are very important questions. Knowing how to evaluate LTCI coverage in light of your own needs is the key to comparing and weeding out policies. Your final list of policies should include only ones that can offer exactly what you’re looking for.
– Lori Woehrle