A Buyer’s Guide To Long-Term Care Insurance
A Buyer’s Guide To Long-Term Care Insurance
Long-term care insurance can help defray the costs of a nursing facility, home care, or other paid long-term care for your parents — or for you. Because the older you get, the more expensive the premiums, people usually buy long-term care insurance in their 50s or 60s, which means it may be more relevant to look into it for yourself than for your elder parents. But it may still be affordable and available for your parents if they’re in their 70s, depending on their health history.
A policy with poor terms and coverage is a waste of money. So, if your parents are going to buy this insurance, be certain they get a policy from a reputable company, and make sure it has good provisions regarding premium raises, types of coverage, inflation protection, and coverage eligibility and exclusions.
Once you and your parents have narrowed your choice to a few policies, you can use the long-term care insurance buyer’s worksheet to compare policy terms and conditions side by side.
Long-term care insurance basics
Here’s a quick summary of the basics, pro and con, regarding long-term care insurance:
Best For
· People with liquid assets between 0,000 and ,500,000
· Those who don’t have extended family who are willing and able to provide unpaid long-term care
· People who will have enough retirement income to cover premium payments
Not So Good For
· People with less than 0,000 liquid assets
· People whose retirement income may not be able to keep up with premium payments
Look For
· Controlled premium hikes
· Inflation protection
· Highly-rated insurance company
Watch Out For
· Policy conditions that make it difficult to qualify for benefits
· Coverage exclusions
· Unwritten promises by insurance broker
Tip
Unless your parents are first buying long-term care insurance in their late 70s or early 80s, they’re not likely to qualify for the benefits for at least 10 and perhaps 20 or more years. So, in every aspect of choosing a policy, you need to consider what their financial capabilities will be over the course of that time. That is, they shouldn’t buy a policy whose premium will become too high for them to pay down the road.
You also need to consider what the cost of care is likely to be later, not now. That means buying a policy with good inflation protection.
How to begin searching for a long-term care insurance policy
Like any insurance, a long-term care policy is a financial gamble: A buyer bets years of premiums against the likelihood of a long stretch of expensive long-term care. If your parents decide to take the gamble, you need to make sure they get a policy with premiums they’ll be able to afford for many years to come — and one that will pay substantial benefits if and when they need care. Here’s what to consider when shopping for a policy.
You have three basic options:
Insurance agents or brokers
Large private or government employers (if either of your parents has worked for such an employer — and, in some cases, if you do)
Professional, labor, fraternal, or other nonprofit organizations
Insurance brokers or agents tend to be familiar with a limited number of long-term care insurance policies (ones they sell and perhaps some from direct competitors). So, while you may want to consult an insurance agent (who usually represents only one company) or a broker (not restricted to one company) about policies, don’t limit your search to only one.
Also, don’t rely on what an agent or broker tells you about how the policy works or what it covers. They usually don’t know the policies in much detail. Make sure you get an actual copy of any policy your parents are seriously considering. Look it over with your parents, and put in writing any questions you have. Get those questions answered in writing by a representative of the insurance company itself, not just in conversation with the agent or broker.
Large employers may offer long-term care insurance policies. Check with your parents’ previous and current employers to see if this is the case. If so, the prices may be a bit better than what you can find on the open market. But remember that the policy itself is from an insurance company, not the employer. So it’s equally important to thoroughly check out any employer-sponsored policy. Also, if either of your parents is a veteran, check with the Department of Veterans Affairs about its long-term care insurance program.
Professional, labor, fraternal, or other nonprofit organizations may also offer long-term care insurance policies. If either parent belongs to any such organization, find out if it sponsors group policies. If so, the organization’s buying power may result in a better price than your parents could get for a similar policy they purchased as individuals.
Group