Searching for a Long-Term Care Policy

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Searching for a Long-Term Care Policy

Although no individual can be singled out for a rate hike, in most policies the premium is not guaranteed. (Across-the-board increases are not expected, but are possible.) For this reason, some people prefer getting their premium payments "out of the way" for life by making a fixed number of annual installments (ten, for example) of an agreed amount. This option is not offered with most policies, however. Buying long-term insurance should be part of your retirement and estate planning process.

Start with knowing what you want

Begin by acknowledging your primary goals in planning for long-term care (LTC):

• Freedom of choice in quality long-term care—we want as much as possible to make whatever arrangements are best at the time of need.
• Finding the lowest reasonable cost to acquire that freedom, whether it is insurance premiums, payments out of pocket, or some combination of the two.

In many cases the limited premium dollars available—this and every year—will constrain all policy choices. But even those of us who are a bit less cost-conscious should be guided largely by their budgets in making coverage decisions and evaluating options. Otherwise the premiums could become a hardship or even impossible to pay, resulting in a policy lapse. That is why it is so critical that the budget be projected realistically.

Other important things to consider

There are additional considerations in choosing a policy for those who are financially better off and or have many years before the likely need for long-term care. They might want to self-pay a portion of their LTC costs.

If you are among this group, it is wise to plan financially for LTC as we do for other risks, such as premature death or high medical expenses: if the need arises, how much of the financial hit will you and your family be able to absorb without undue hardship? Whatever figure you determine, the remainder should be covered by insurance, if at all practical.

At a minimum, try to estimate the possible cost of five years in a nursing home of your choice—not now, but late in life. Compare that to the assets you expect to have available (and want to use) to pay for it. Your financial advisor should be able to help make these estimates with acceptable accuracy.

The most relevant factors to consider

Below are the most important LTC policy variables about which you must decide:

• Maximum daily benefit
• Benefit period
• Elimination period
• Inflation protection
• Coverage of home and community-based care
• Non-forfeiture protection

You should be able to sit down with representatives of insurance companies you trust. They are the best source of answers to specific policy questions. They can also quote premiums for any combination of benefits you desire, so you can see how adjusting your original choices affects the policy cost.