Long-Term Care Policy Considerations
Today’s LTC insurance product uniquely fills the needs of many of the 34 million Americans age 65 and over, plus many of their 76 million adult children — the baby boomers, plus those younger folks who are concerned and want to take action now to preserve their assets, their nest egg, and their insurability.
Today’s LTC policies are vastly superior to earlier products which required a three day hospital stay to start benefits, had many gatekeepers, and covered only skilled nursing facility charges. While they were the best that could be offered at the time, increased underwriting and claims experience has made it possible for today’s LTC products to offer options and benefits unheard of just a few years ago. They not only cover nursing home care, but also pay for care at home and in community settings such as assisted living facilities and adult day care centers.
Most policies will pay benefits because of a cognitive impairment such as Alzheimer’s disease or because of inability to perform a specified number of activities of daily living. They cover all levels of service, including personal or custodial care. Home care and care in community settings are routinely included. Bed reservations, respite care and once-per-lifetime elimination periods are now standard features of many policies.
LTC Policy Considerations
Listed below are some of the things you should consider in selecting a policy. They are not necessarily in priority order.
Many of today’s policies offer spousal discounts when both spouses apply and are covered at the same time. Married couples can also choose a “Spouse Waiver of Premium – which waives premiums for both spouses when one spouse is receiving benefits. There’s also a Survivorship Benefit which waives all future premiums for a surviving spouse providing both policies were in effect for a specified period of time. Also available is a Shared Care Benefit, which allows one spouse whose benefits are used up to access benefits under the spouse’s policy. And if one spouse is uninsurable, a Spouse Security Benefit will pay a cash benefit to the uninsured spouse when the insured spouse is receiving benefits under the policy.
Benefits Paid for Many Types of Care
Unlike many government programs (like Medicare) today’s policies pay for all levels of care whether it is received at home, or in a licensed assisted living facility or nursing home.
Look for a policy that will pay cash benefits when care is provided by a spouse, friends or family. Look for a policy that offers this cash benefit with No Elimination Period Requirement and No Bills to Submit.
Look for a policy that will give you a “helping hand” with Basic Services. (For example, when a Home Health Aide is needed to assist with bathing, dressing, and eating or for Homemaker Services for assistance with cooking, cleaning and transportation.) Adequate coverage for Professional Services is important too, which may include Registered Nurses, Physical Therapists, Audiologists, Chemotherapists, etc.
Many policies include a Care Coordination benefit, which is available without an Elimination Period. Those using the Care Coordination Benefit can have access to Caregiver Training, Home Modification, Medical Alert System, Alternate Care and Durable Medical Equipment. The Care Coordinator can also assess a person’s needs and develop a plan of care. And don’t forget to look for a policy that pays a cash benefit when care is provided by family and friends.
Adult Day Care
Many prefer to remain in the privacy of their home in the evening, but receive care in a group setting during the day. Look for a policy that allows this flexibility.
Care in an Assisted Living or Nursing Facility is generally covered, providing the facility is properly licensed.
As time goes by, more and more innovative features and built-in benefits are showing up in the marketplace. These include an Additional Benefit for Injury to Age 65 and a Return of Premium Benefit if the insured dies prior to Age 65. Also look for a policy that has a Respite Care Benefit to provide unpaid caregiver relief or a Bed Reservation Benefit, that pays for your nursing home or assisted living facility room while you are temporarily away.
How much will the policy pay for the care you need? Some of today’s policies offer a choice of benefits that can range from $1,500 to $9,000 a month. Since assisted living costs less than nursing home care, premium sensitivity is addressed by those policies offering a range of assisted living options, starting at 50% of the maximum monthly benefit. And since most prefer to receive care at home, look for a policy that offers monthly cash benefits – even when care is provided by spouse, family, and friends. When Professional Home Care Services are needed, some policies pay up to 200% of the nursing home benefit to meet the high cost of skilled home care.
It’s a good idea to check the prevailing prices of home care and facility care in your geographic area before deciding on benefit amounts that will give you sufficient protection.
How long will the policy pay? Newer policies offer benefit periods ranging from two to eight years – or for an unlimited period of time. How long a Benefit Period you choose may depend upon your age, assets at risk, or ability to pay premiums over a period of time. Some policies offer an optional Restoration of Benefits provision which reinstates used policy benefits if care isn’t required for a period of time (generally 180 days).
Waiting (or Elimination) Period
How soon will your insurance pay once you require care? It can depend on where you receive care and the Elimination Period(s) you select. These can range from 0 to 365 days. Because care generally starts at the home, some carriers allow applicants to choose 0 days for home care and a longer elimination period for care in a facility.
Also available are inflation adjustment options (sometimes called Benefit Increase Options) that automatically increase policy benefits each year. Increases are usually based on a specific percentage (chosen by the applicant at the time of application) and can extend over the life of the policy or for a specified period of time (10 or 20 years or until 2x, 3x, or 4x the initial benifit is reached.). Lifetime increases can range from 2.5% to 5% Compound or 5% Simple.
Premiums and Rate Guarantees
In general, premiums are based on your age at the time of application. The younger you are when you apply, the lower your premiums will always be. It’s also best to apply for Long-Term Care insurance while you’re in good health. If you wait, you may become uninsurable. Premiums can only be changed on a “group basis” when approved by your state’s Department of Insurance. Individuals cannot be singled out for a rate increase…regardless of their claims history.
Some policies also include a Five-Year Rate Guarantee, which can be extended up to ten years.
A pre-existing condition is one that you have received medical attention for whether it be a physical or mental health condition, or an illness or disability within a certain period prior to applying for long-term care insurance. Depending on when the condition occured and the severity of the pre-exisiting condition will determine whether or not the company will approve the policy. Occasionally
People who are sick may try to buy coverage. Obviously, this is not good for the insurance company or its policyholders. Companies can “look back” to see if there is a health history. When people have a pre-existing condition and disclose it on the application, some companies may issue the coverage if the condition occurred some time ago or it is not considered serious. In this case, the condition will be covered. Other companies may decline to issue the policy.
**Another option for those who do not qualify because of a pre-existing condition, we also offer a product called Critical Care which covers 70-80% of Long-Term Care situations.
Mental and Nervous Conditions
Some policies exclude these conditions if there is no demonstrable organic cause (a deficiency in the normal functioning of the body – for example, depression). Most companies have now modified their exclusion to cover such conditions as Alzheimer’s Disease and senile dementia when a physician has diagnosed them as having a demonstrable organic cause.
Do Your Homework Before You Buy! A Long-Term Care Specialist Can Help Guide You.