Long Term Care Insurance

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Planning to cover your own insurance needs, from finding good personal health insurance to choosing the correct auto insurance coverages can be a challenge. Don't forget to consider your role in caring for aging parents as you build your insurance portfolio. Between the financial extremes of abundance (stockpiled cash, trust funds, or earmarked annuities) and a poverty-based qualification for Medicaid, choosing LTC insurance becomes more complicated when considering what's reasonably affordable. The price tag for three weekly in-home visits seems small compared to assisted living facilities, nursing homes, or continuing care retirement communities (CCRCs), but those home visits might not cover all your real needs.

Payment options are also a sobering concern. If your family member is a veteran, the Veterans Administration may pick up some of the expenses related to a stay in a long-term facility.

Medicare and private health insurance policies do not cover long term care; they generally cover only medicine and medical care—though Medicare covers limited short-term care services if they follow a hospital stay of more than three days. Medicaid only covers those without assets or income.

An increasingly popular option is long term care insurance. Advantages include lowered or locked-in rates if purchased well in advance of its use. Another plus is that most LTC premiums qualify for tax breaks. Remember, though, long term care insurance does not provide medical coverage. It is a complement to, not a replacement for, medical insurance.

Tips and considerations With Long Term Care Insurance:

-Think about purchasing a policy before you or your parent reaches the age of 65. Today's healthy 50-year-old pays a yearly rate of about $1,500 for LTC coverage, while a healthy 65-year-old might pay $2,000 to $3,500. This increases in proportion to a decline in health. Overall rates are expected to increase dramatically in the next few years.

-Read the fine print! Ask an Elder Law Attorney to check policies before you sign them. Ask whether the premium can be modified in the future (e.g., whether additional coverage may be added, how coverage is adjusted with changes in health, and whether it would remain consistent if an emergency evacuation required a move), and at what price.

-Make sure the policy clearly states what is covered. Some policies cover nursing home care, but not assisted living; others are more inclusive. Choosing a limited type of coverage is often less expensive, but a gamble since need is hard to predict.

-Check whether the policy includes a waiting period during which you must pay all of your expenses out-of-pocket before your LTC coverage kicks in-a kind of LTC insurance deductible. The downside is that expenses during this period (called an elimination period) may be very costly and drain what resources you have. The upside is that some companies lower their premiums in proportion to the length of the waiting period, which can be up to 100 days.

-Look at what qualifications the policy requires for benefits to kick in. Does it require a hospital stay? What about pre-existing conditions? Does coverage change if dementia is thrown into the mix?

-Perform a background check on the financial health of your provider. Companies such as A.M. Best and Moody's do annual evaluations on all insurance companies, reporting such events as complaints filed for non-payment. Avoid providers with reputations for dropping clients when health status changes.

Finally, for all of these long term care insurance options, remember the bottom line: Will your plan provide complete coverage, overall savings, and real value, or merely cut down on year-over-year cost?

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