Buying Long-Term Care insurance should be done carefully and thoroughly. Premiums for Long-Term Care insurance are based on the benefits you select, your age, the number of years you want the policy to pay benefits when needed, time to become eligible and whether you buy inflation protection.
Main factors to consider:
· Age. Age is an important factor that influences the cost of Long-Term Care premiums. The time to start is now! Premiums are set at the time you buy the policy. The longer you wait the costlier it becomes. For example, annual premiums typically double between ages 60 and 70.
· Nursing home only or comprehensive coverage? A policy can be tailored to cover nursing home and assisted living facility only or you can get a comprehensive coverage. Comprehensive allows you to have care either in your own home, assisted living facility, adult day care, or nursing home. It is more expensive than nursing home only but has the widest range of options. I can guide you in selecting a suitable coverage.
· Elimination Period. This is how long you have to wait after qualifying for benefits before the policy starts to pay. The longer the waiting period, the lower the policy cost. The longer the waiting period is the more out of pocket expense you may incur once you have a claim.
· Daily/Monthly benefit amount. This is the amount of money that a policy will pay for care in a nursing home. You can choose anywhere form $50 per day up to $250 per day. If the policy is comprehensive, most companies allow you to choose an amount for home health care coverage based on a percentage of the nursing home benefit amount. Example: Nursing home daily benefit amount=$100 at home care at 50% = $50 per day. Some companies use daily amounts some use monthly but the result is the same. The higher the amount the higher the cost.
· Benefit Period. This is how long the benefits will be paid. You choose from one year, two years, or more up to lifetime benefits. The benefit period does not start until you become disabled. When you buy three years of coverage, you can draw benefits until three years’ worth of the maximum daily benefit has been used up. Example: You buy a policy with a three-year benefit period. On the date that you satisfy your elimination, you will have coverage from that day forward for three years. Three years is the minimum benefit period you should consider. If you can afford more or are female, consider longer benefit period or lifetime coverage.
· Inflation Protection. Inflation protection increases automatically the amount each year your policy pays out, in equal amounts called simple inflation or it increases by yearly compounding. The increase both ways is typically 5% a year. However, the compounded amount will increase faster than the simple amount. Each one is an option and you pay more to have it and the compound costs more that the simple. Automatic, 5% compounded annual inflation rider is recommended for buyers under 65. Simple, non-compounded 5% inflation is usually an acceptable option for those in their seventies.
· Non Forfeiture. This option will pay your future premiums if you are unable to meet the payment obligations, however, it is an extra cost and you should consider whether paying a higher premium is worth the protection.
There is no one-size-fits-all rule for buying Long-Term Care insurance. Insurance coverage varies greatly and so do the policy costs. It is critical to buy from a well-known, financially strong insurer with a good record of accomplishment in the Long-Term Care business. I will be happy to assist you make the appropriate selection.