Types of Policies

Comprehensive Stand-alone - Comprehensive Stand-alone, comprehensive coverage policies represent the bulk of policies sold. These plans strive to cover all long term care services and are usually purchased with monthly, quarterly, semiannual or annual premiums and are paid for the life of the insured.

Comprehensive stand-alone policies are very much like the typical modern group or individual health insurance policy. They try to cover as many different care alternatives as possible. Types of care found in most comprehensive long term care insurance policies are Nursing Home Facilities, Assisted Living Facilities, Home Health Care, Adult daycare, Respite Care, Care Coordination.

Nursing Home Only and Home Care Only -These policies cover for only nursing home or home care only and are less flexible. Some insurance carriers have eliminated these types of policies in favor of just offering comprehensive coverage to give people flexibility. With specific type of long term care policies, people have later regretted the lack of choice at the time they’ve actually needed the benefits.

Things to look for in a Policy

Many long term insurance carriers design policies with cash values, life insurance death benefits or return of premium at death. But be aware that these features increase premium cost. Policies without these features can be more cost effective. Insurance doesn't have to cover all the risk. To make long term premiums more reasonable you can elect to receive a lower daily benefit, and make up the difference with your savings and steady income from your pension plan.

The premiums should not become a financial burden and the future benefits should be substantially more than the premiums. The policy should be tailored to cover your specific choice of needs.

Consumers must choose how many years of coverage they think will be needed. Most opt for somewhere between four and six years, as the average stay in a nursing home is between two and three years. The next decision is over the amount of the daily benefit. Today, $100 to $150 a day seems the norm. This is the maximum reimbursement received, though many companies allow a pool of unused benefits ($80 one day, the remaining $20 is added on to the total pool of money available over the policy term). Be aware of the costs of care in your geographical area when trying to determine the daily benefit you may require.

Note that coverage offered today is far more comprehensive and oriented toward in-home care, rather than the nursing home-only coverage of past long term insurance.

Policy Features to Avoid

- Insurance premiums that increase with age. Your ability to pay those premiums may decrease, making the cost a financial hardship. The cost of long term care insurance should not impair your present or future lifestyle.

- Home health benefits not provided or provided only after receiving nursing home care. Or, hospitalization or skilled care must occur before benefits are paid. Be aware if these requirements are options that will cost less in premiums, but may restrict your care.

- A clause that specifies that the policy is renewable only under certain conditions.

- Maximum benefit period is less than two years. Don’t unnecessarily restrict the length of time you may need benefits unless you believe your needs will fall within that time period.

- The deductible or waiting period (called the policy elimination period) exceeds 100 days. Longer deductibles usually equate to lower premiums, but a 3 month plus waiting period may not fit your need.

- Policy excludes coverage for mental or nervous disorders, including Alzheimer's disease. Look for a written statement for “cognitive impairment” and what it covers.

Things to Look for in a Carrier

Find an expert knowledgeable in long term care insurance products. There are many choices and options to sort through in tailoring a policy which comes as close as possible to meeting your long term care needs and budget.

If you are in excellent health, or buying a policy as a married couple, discounts can cut premiums significantly. Carriers use different methods to determine who qualifies for a preferred rate. Spousal discounts are available as well. Some carriers will offer the discount to the insurable spouse, even if the other spouse is declined. Some carriers also offer discounts for multi-lives or employer-sponsored discounts.

Check for premium rate stability, the insurance company’s size and strength, and its business history and commitment to the long term care insurance industry. Keep in mind that in most cases long term care insurance is a long time proposition. Most policyholders don’t require benefits until 10 to 20 years after the policy has been issued, so make certain it is a robust policy.

Understand the carrier’s claims process and what percentage of claims that have been filed are paid. Policies once started are guaranteed renewable, but find out if the carrier has ever increased in-force premiums and if so, how often. You want to determine your policy’s premium stability.