A Buyer’s Guide To Long-Term Care Insurance
policy.
This type of shared policy makes a lot of sense because women tend to live longer than men, and so they usually need longer periods of paid care. Share-care policies cost more than two individual policies, but they’re a particularly good idea if either of your parents living alone would likely depend mostly on paid care, or if one of your parents is quite a bit younger than the other.
Hidden coverage exclusions you should know about that might prevent benefits from being paid
During the first decades in which these policies were sold, many long-term care insurance policy holders never saw a dime in benefits. A major reason was that many policies had coverage exclusions — buried in the policy’s text, obscured by insurance lingo — that blocked people from getting their benefits. Policies have fewer of these exclusions now. But they still exist, so it’s important to keep an eye out for the following:
Prior hospital or skilled nursing facility stay requirement. This can be a disastrous policy provision. Many early long-term care insurance policies would not pay benefits unless the long-term care followed — usually within 7 to 30 days — a stay of at least three days in a hospital or a skilled nursing facility. But many people need long-term care because of increasing frailty, chronic illness, dementia, or Alzheimer’s, which do not necessarily lead first to hospitalization or skilled nursing facility care. With a prior hospitalization requirement, these people would be completely out of luck. Most states have outlawed these exclusions, but they’re still legal in about a quarter of states, so keep a sharp eye out for such a policy provision and avoid it at all costs.
Permanent exclusion for certain conditions. Most long-term care insurance policies permanently exclude coverage — meaning no benefits will ever be paid — for care that’s necessitated by certain conditions, the most common being drug or alcohol abuse and HIV-related illness. But some policies also permanently exclude coverage for mental illness, Alzheimer’s, certain forms of heart disease, and certain forms of cancer or diabetes. Be very careful not to buy a policy that excludes coverage that results from any of these common conditions.
Preexisting conditions. Many long-term care insurance policies have an exclusion period for care related to an illness or condition that a parent had before buying the policy. This means that for a certain period after long-term care has begun, the policy pays no benefits for that condition. A relatively short exclusion period — one to three months — is acceptable, but avoid any exclusion period of more than six months.
Elimination or waiting period. Elimination or waiting periods refer to a timeframe — from ten days up to a year — immediately after your parents qualify for benefits during which the policy doesn’t pay anything. The longer the waiting period, the lower the premiums — for example, a waiting period of six months could reduce your parents’ premiums by a third. The younger your parents are when buying a policy, the more sense it makes to trade a longer elimination period for a reduction in premiums.
When benefits payments will kick in
To begin collecting benefits, an insured individual has to meet certain conditions, called the benefit trigger. The conditions usually have to be certified by a doctor. A good policy allows this certification to be made by your affected parent’s doctor, though the insurance company may have its own doctor check this determination. There are two different ways a policy might define the benefit trigger:
Activities of daily living (ADLs). Most policies use ADLs to determine when someone qualifies for benefits. Each policy includes its own list of five to seven ADLs, and your parents must need assistance with a certain number of them to trigger benefits:
· Bathing
· Eating
· Dressing
· Using the toilet (“toileting”)
· Walking
· Getting in/out of bed/chair (“transferring”)
· Taking medications
· Remaining continent
Some policies require that a parent need help with two ADLs; others require three. Some have different qualifying numbers for home care than for nursing facility care.
In choosing a policy that uses ADLs as its benefit trigger, make sure of a few key points:
Bathing and dressing must be included in a policy’s list of ADLs — these are almost always the first tasks that someone needs help with.
Be sure that benefits are paid if acognitive impairment (such as Alzheimer’s or dementia) prevents the covered parent from performing the required number of ADLs, even if he is physically able to perform them.
Be sure that the policy doesn’t consider your parent able to perform an ADL just because sometimes he can manage it.
Medically necessary due to illness or injury. A few policies require a doctor