LTC
Insurance
What to Consider When Buying?
Purchasing
an LTC Insurance plan can tend to be a complicated thing. An
uneducated consumer can make many mistakes as he shops around far
an LTC Insurance Policy. Many of these could be avoided if
he was to first read our LTC Insurance guide.
Guide to LTC Insurance - Benefit
triggers
Benefits will be paid when certain benefit triggers and other conditions
must are met. A person's ability to do one or more activities of daily
living (ADLs), such as bathing or dressing, or by testing the person's
cognitive abilities will cause benefits to be paid.
Nursing home care, home
care, assisted living will be paid by the long term care insurance
policy when a person can't do two of the ADLS listed in the policy
(if the policy was sold after July 2001), or when a person has an
cognitive impairment like Alzheimer's and has met other conditions
in the policy.
Tax-qualified policies
use a list of six ADLs:
Dressing
Transferring
Toileting
Eating
Bathing
Continence
Non-tax qualified policies use seven ADLs, ambulating (walking) is
added to to the list.
Stand-by
assistance
There are cases that people cannot perform a single activity of daily
living (ADL) — they need someone another person to do it for
them. A person who can't fully complete a single activity of daily
living will another to help him or her. In the case that the person
has a cognitive impairment, the patient may need a helper to remind
him or her how and when to do things.
Waiting
periods (Deductible)
A waiting period is just like a deductible. A policy will begin paying
benefits, after a specific period of time when the insured is eligible
to receive them.
Different options are available
on waiting periods. There is an option not to have a waiting period
and the policy pays from the first day one is eligible for benefits.
Other's decide they will pay out of pocket expenses for the first
30, 60, or 90 days of their long term care, and the LTC insurance
policy will begin paying benefits afterwards.
There are companies that
will count only the days that you actually receive paid care as counting
against the waiting period; others count every day that a person is
incapacitated, regardless of whether you actually received care.
There are companies that
only require that you meet the waiting period once in your lifetime;
others require you to meet it every time you go on claim.
When you agree to pay for
the first month of your nursing home care, it will cost you on average
$4,850 (in 2004), and more if your waiting period is 60, 90 or even
120 days. Remember too that this cost will increase each year with
inflation. Be sure you can afford the cost of the waiting period you
choose.
If the LTC insurance policy
you choose only counts each day you receive care toward the waiting
period, the number of days before the LTC policy begins paying benefits
could be substantially longer than you anticipated. For example, if
you receive home care for two days each week, it could take 15 weeks,
or three months before you meet a 30-day waiting period.
90-day certification for a Qualified LTC Insurance Policy
Certification by a health care professional that your expected need
for LTC insurance services will be at least 90 days are required for
a tax qualified LTC insurance policy. Verification that the need for
LTC insurance is not a short term issue. Regardless, a waiting period
of 30 days will be applicable and honored if the illness is certified
to be expected to last at least 90 days.
Daily benefit amount on a LTC Insurance Policy
Each day of care has a maximum amount the LTC insurance policy will
pay. Policies may pay the daily benefit when one is nursing home confined,
but for all other kinds of care they may pay a percentage of that
maximum amount. For example, let's say that the maximum daily benefit
amount for nursing home care is $200, the daily benefit for assisted
living must be 80% of that amount, and for home care, 75%. There are
companies that will pay the actual daily cost of care up to certain
amount or 100% of the daily benefit in each place covered by the policy,
whichever is less. There are LTC insurance policies that pay the home
care benefit on a monthly basis to allow care to be scheduled, planned
and paid for on a more comfortable basis.
Duration of benefits on a LTC Insurance Policy
LTC Insurance Policies are usually sold to cover at least one year
of care. One may buy a policy that only pays benefits for one year,
or one that pays for two thru five years, or one that pays benefits
for as long as you live. The premium is based on each year of coverage
you buy. Two years of benefits cost more than one year, and five years
more than two, while lifetime benefits can be very expensive. People
choose based on the amount of premium they can afford.
Maximum policy benefits on LTC insurance Policy
This is the total amount the policy will pay out over one's lifetime
once you trigger benefits, regardless of how and when you collect
those benefits. In California, LTC insurance companies must use a
"pool of money" method to pay benefits.
As example, if one were
to buy a policy that paid $200 a day for three years, the maximum
policy benefits would be $219,000. If one used the benefits at the
full $200 every day, one's benefits would last three years. However,
if one's care cost less, or you only used the home care benefit at
$100 day, the policy would last substantially longer.
Inflation
protection
During the purchase of a LTC insurance policy in California, companies
and agents must offer you the inflation protection rider and show
you the benefits of inflation protection. You must sign a form acknowledging
that you understand that the benefits will not keep up with the cost
of LTC inflation in the future if you turn down the offer. The daily
benefit you choose and the cost of care in the years to come must
weigh your in your decision at the time of purchase. Benefits on your
LTC insurance policy without inflation protection will erode over
time because of inflation.
LTC Insurance Companies
are required by law to offer you two ways to protect your insurance
policy investment. Firstly, inflation protection at 5% compounded
is built into the policy. With this added protection the premium will
be higher than it would be otherwise, but the premium won't go up
in the future because of this added benefit.
The second option offers
you the right to add the inflation protection rider at periodic intervals.
This protection can't be denied to you, but the premium will increase
each time you choose this option, and this option may become prohibitively
expensive as you grow older. As well, if you don't exercise this option
each and time it's offered, you may lose the right to choose it.
Example: A $100 daily benefit
with 5% compounded inflation protection will double to $200 a day
in 14 years, the same benefit without this protection will be worth
only half its original value 14 years in the future. If the cost of
LTC continue to increase above to inflation rate you will have to
pay the difference between that benefit and the cost of LTC.
Additional benefit protections on a LTC Insurance Policy
According to federal law, Assisted living benefits (ALB) must be paid
for any residential care facility for the elderly (RCFE) facility
that is licensed. Small neighborhood homes, retirement homes, and
community facilities for Alzheimer's patients are included in this
legislation. According to the law, the daily benefit must be equal
to at least 80% of the policy benefit for nursing home care, and the
benefit trigger can be no greater than two activities of daily living
(ADLs) or cognitive impairment which is what is included in a standard
LTC insurance policy.
Nursing home benefits include
the cost of all LTC services you receive up to the maximum daily benefit
amount (not just room and board). The benefit trigger can be no greater
than two Activities of Daily Living or cognitive impairment.
Home care benefits include
services for personal care, skilled care, and homemaker services,
respite care, adult day care and hospice care and the benefit trigger
can be no greater than two Activities of Daily Living or cognitive
impairment.
According to the law, 1.)companies
must allow an policy holder to reduce their benefits in return for
a lower premium, 2) to increase their benefits at their current age
with new underwriting (medical history), or to buy new lTC insurance
benefits at their current age with new underwriting when the lLTC
insurance company develops new products or new benefits.
The
"Personal Worksheet"
Rate increases by the company are revealed in the "Personal Worksheet."
There are questions about your LTC planning. To be certain that you
are an appropriate purchaser of this type of insurance the LTC insurance
company ask for income and asset information. In any case, you can
refuse to fill out that part of the worksheet. The LTC insurance company
will later contact to make sure that it was your choice to not provide
this personal information. The LTC insurance agent will leave you
one copy of the worksheet, send one copy to the LTC insurance company,
and keep one copy in his or her office files as proof that you were
given the documents required by law.
Dealing
with agents
Pressure you to make a decision should not happen with a professional,
well-trained LTC insurance agent. However, there should be some idea
of what you want in your LTC insurance policy as well as a realistic
idea of what you can afford before you purchase this particular type
of LTC insurance.
LTC
insurance agents are a "dime a dozen." Selling you LTC insurance
policy should be an honor and a responsibility for the licensed insurance
agent. The LTC insurance agent should be someone that you can trust.
If the particular LTC insurance agent does not seem knowledgeable
and trustworthy, you should find someone else. There will be a need
to contact your agent later years if there is a desire to change any
of your benefits or if a claim arises. Therefore, the LTC insurance
agent should be "here to stay."
A LTC insurance agent who
has up-to-date training on LTC insurance and who works in an established
business will have the resources to service your needs.
LTC Insurance is sold by
100s of companies in the United States. There are LTC Insurers that
have decades of experience while others just entered the market. Large
insurance companies with many other products and subsidiaries as well
as other who are smaller and specialize exclusively in LTC insurance.
A Rating services like AM Best or Weiss Ratings can provide information
to help you evaluate the financial strength of the various companies.
Ratings indicate financial strength of the insurance carrier.
The Department of Insurance
in each state publishes comparative information about LTC insurance
products sold in respective states and a complaint ratio for all insurance
companies. The insurance departments also publish data showing which
indicate the increases in premium on LTC insurance, the percentage
amount of the increase, and which policies were affected.
When buying your LTC insurance
coverage through a group it is important to check to see whether the
policy is approved in your state. If not approved in your state, the
same high standards or protections that are required by your state
law the may not be present.
