A Buyer’s Guide To Long-Term Care Insurance
holding the same policy. For this type of premium raise, an insurance company needs approval from the state insurance commission. This provides some protection against frequent or dramatic premium increases.
Attained-age premiums increase every time the insured reaches a certain age benchmark: 70, 75, 80 years, and so on. If an attained-age policy spells out how much the premiums will rise at each attained age, it offers some predictability. You can do the math and figure out whether those amounts seem like they’ll still be affordable 10 to 30 years out. Avoid a policy that says premiums will increase at various age benchmarks but fails to spell out by how much.
Issue-age premiums, which are less common than the other types, use the age at which your parents first buy the policy as the basis for premium increases. Let’s say one parent buys a policy at age 65. From then on, your parent pays the same amount as anyone who first buys the same policy at age 65 — no matter what age your parent reaches. The premium steadily increases as the cost of insurance does, but market forces provide some limit on how much it will go up, since the company will always want its rate to look attractive to new 65-year-old buyers. This is a risky kind of policy term.
Be prepared for premium hikes. During the first two decades, when long-term care insurance was first being offered, policyholders forfeited about half of all policies because they were unable to keep up with rising premiums. So, unless you’re certain what a policy says about the circumstances under which its premiums can be raised, your parents shouldn’t buy it.
Premium payments once your parents start collecting benefits
A policy term called a “premium waiver” allows your parents to stop paying premiums after collecting benefits for a certain period — usually 30 to 90 days. A few policies allow an immediate premium waiver. Be aware, though, that some premium waiver provisions apply to collecting nursing facility benefits but not to home care. Usually, a more generous premium waiver provision means slightly higher initial premiums.
Types of care coverage available
Some policies routinely include coverage for several types of care. Others charge extra for different types of coverage. Here are the types of care covered, and the situations under which your parents might consider them:
Nursing homes. As part of standard terms, all policies offer nursing home coverage. This is the most expensive care — other than 24-hour home care — and the type that concerns most people. Still, it’s possible that your parents might never need nursing home coverage and, if so, could save a lot of money by limiting coverage to other types of care. This could be the case if one of your parents has a younger, healthy spouse who can serve as a primary home caregiver and many nearby family members are willing and able to commit themselves to help care for your parent at home. If so, your parents might choose to buy coverage for home care but not for a nursing home for one of them, and broader coverage for the other.
Assisted living communities. Assisted living, in which elders maintain their own private living space in a group setting, is for those who need some assistance and monitoring but not at the level of care a nursing home provides. Many policies now include assisted living coverage as standard, but many others charge higher premiums for it.
Home and community care. Including home care in a policy can make the difference between your parents staying at home — theirs, yours, or another family member’s — or having to move into a nursing home. As their needs grow, paid home care can allow them to live with family but not place the entire burden of care on family members.
Some policies also include coverage for community care, which usually means adult daycare. This is nonresidential care during “office hours” at a senior center-type facility. It can help allow your parents to live in a family member’s home by relieving the family from care duties during the daytime.
Independent, nonagency home care. Home care from a state-certified agency is covered by any long-term care insurance policy that includes home care. But many people find that independent, nonagency home care aides provide more flexible, more consistent, and far less expensive home care than aides provided through a home care agency. To take advantage of independent — even unlicensed — home care, a policy’s home care coverage should not be limited to state-certified home care agencies.
How much benefits coverage your parents need
Most long-term care insurance policies pay a set daily benefit amount, usually twice as much for nursing home care as for home care, while benefits for assisted living are usually somewhere in between. What’s the right amount for your parent?
There’s little point buying a policy if the