Health Insurance, Long Term Care

Everything you need to know about insurance


Insurance Q.& A. :    Health Insurance, Long Term Care

What does long-term care cover?

A typical long-term care policy covers extended care regardless of whether the care is medically related to a specific illness or injury. According to the National Network of Estate Planners in Denver, a typical policy will pay for care "provided either in a nursing care facility or at home. In some cases, long-term care also extends to adult day-care centers and other community-based care facilities. The following expenses should be explicitly listed in your policy contract as covered: respite care, home modification, hospice care, caregiver training, professional health-care services, and personal care adviser and bed-registration fees if you are moving to a nursing home.

Is there any rule of thumb to determine if I should buy
long-term care insurance?

Long-term care insurance can easily cost more than $1,000 a year, which is one reason some experts say that if in addition to your home, you expect to have over $10,000 in assets and over $30,000 per year in income when you reach your 80s, then a long-term care policy with high benefits and compounded inflation protection should be a reasonable investment if you can find and qualify for a good one. " According to the National Network of Estate Planners, Denver, Colo."   

If I'm in my 30s or 40s, why should I be concerned about long-term care?

If you're under 50, you can't be blamed if you might consider purchasing a long-term care policy a waste of money. After all, it may be a long time before you need long-term hospitalization or nursing care. But just as with life insurance, it's never too early to think about buying long-term care coverage. Such insurance is much cheaper when you're young because the insurer knows it's unlikely you'll need to be hospitalized any time soon. For example, if you sign up when you're 50, your annual premiums will be about 30% as much as those for a 75-year old, and you will be covered for 25 years more. In addition, it's much easier to qualify for long-term care insurance when you are young. All the application forms ask you about a host of medical conditions you may have experienced: If you answer "yes" to any one of them, your application may be rejected. But since most of those conditions develop only as you grow older, you probably haven't had them. Long-term care policies are good investments for most people. Being young doesn't automatically exempt you from deciding whether to buy such a policy.

From whom should I buy long-term care coverage?

If you decide to buy long-term care insurance, choose an insurance company that will be financially strong enough to pay any claim you might make. Stick to plans offered by insurers who get the top financial ratings from independent rating firms. You also want to be sure that you're comfortable with the person who actually sells you the plan. According to the National Network of Estate Planners, Denver, "You should develop a reasonably high trust level with the person who presents a coverage plan to you. You should feel that you have the ability to openly communicate your concerns and receive accurate answers to your questions. It would be beneficial for you to buy from a representative of an organization that can provide current and future service to you as questions or needs arise."

What is the typical premium for long-term care insurance?

A typical policy begins paying benefits 20 days after the onset of an illness or injury that requires long-term care.  While there are a lot of  variables that can affect premium rates, the biggest one is one's age when the insurance is purchased. Typical average preferred rates might be:
Age - Annual Premium
40 $240
50 $460
60 $1,000
65 $1,550
75 $3,300
79 $6,150

A preferred rate might typically be a 25% discount from a standard type rate. If a couple applies jointly, many companies will automatically grant them a discounted rate. The above characteristics represent common provisions, benefits and rating procedures in the industry. However, keep in mind that each company will have its own unique policy and rates. Just make sure you understand what you're buying and how much your are paying.

Do I need a waiver of premium provision in my long-term care plan?

Nearly all long-term care insurance policies contain a provision that waives the policy's premiums if you are eligible to collect benefits. After all, if you're placed in a long-term care facility, you're probably going to need every cent that you can save and you certainly won't be able to go out and work. Be sure that any policy you purchase has such a provision. But also make sure you understand how the provision works. Most insurers will waive the premiums after benefits are paid for a period of 90 days.

Do I need an inflation-protection provision in the contract for my long-term care insurance?

Long-term care insurance is expensive, with a typical policy for people in their 60s often costing more than $1,000 a year. But if you've decided to purchase such coverage, at younger ages it's important to spend a little extra money to ensure that the benefits payable under the policy will rise each year to keep pace with inflation. According to the National Network of Estate Planners, Denver, Colo., "If, as is often the case, you do not collect benefits for 10 to 30 years after you buy a policy, a benefit amount that now seems reasonable might be inadequate when you actually get the care. It is essential then, that if you are purchasing coverage in the early years, that your policy provides automatic inflation protection -- not merely the option to buy added coverage. And the best inflation protection is compounded-meaning that the percentage increase is based on the immediately previous, not the original benefit amount. Good inflation protection does raise your premiums."

If my spouse and I both purchase long-term care insurance, can we get a discount on our premiums?

If you're married and both you and your spouse decide to buy a long-term health care policy from the same insurer, you could qualify for a hefty discount on your annual premiums. According to the National Network of Estate Planners in Denver, "most of the quality long-term care insurance providers allow a discount when both spouses apply for a long-term care policy. The amount of the discount is typically from 10% to 15%. The insurance companies give this discount because spouses living together provide some custodial care that would otherwise be provided by outside sources. Companies also find that spouses living together delay their entrance into a nursing care facility, preferring instead to be at home with their spouse."

How will my insurer determine whether I'm eligible for benefits under my long-term health-care insurance?

If you have long-term health care insurance and make a claim, your insurer will likely look at the "benefit triggers" to determine if you can collect. According to the National Network of Estate Planners, Denver, "The measurement devices, or 'benefit triggers,' are known as 'activities of daily living.' These activities are used to determine whether a person is capable of living independently or is dependent in some areas. There are six commonly recognized activities: Eating, using the toilet, continence, bathing, dressing [and] moving about." Typically, a patient must be unable to perform two of those six functions in order to qualify for benefits under the policy. Some insurers might have additional benefit triggers from which you can collect.


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