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Choosing Your Long-Term Care Policy

By: Source: AARP.org Date Posted: 2005-03-20 12:08:24

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Deciding that you need long-term care insurance is only the beginning. Next, you must sort through the wide variety of long-term care policies available to you. You'll have to make important choices about your policy's specific features. The options you choose will determine the cost of your premiums.

What You Should Know

Policy Choices

• Coverage. You can choose long-term care insurance policies that pay only for nursing home care, or only for home care. Or, you can opt to purchase coverage for a mixture of care options that includes nursing home, assisted living, and adult day care.
• Daily or Monthly Benefit. The daily or monthly benefit is the amount of money the insurance company will pay for each day or month you are covered by a long-term care policy. If the cost of care is more than your daily or monthly benefit, you will need to pay the balance out of your own pocket.
• Benefit Period. Your benefit period determines the length of time you will receive benefits from your policy. You can choose a benefit period that spans from two to six years, or the rest of your life.
• Elimination or Waiting Period. During this period, you must pay all of your long-term care expenses out of your own pocket. This period could last anywhere from 0 to 100 days. The longer the waiting period is, the lower your premiums will be.
• Inflation Protection. Most policies increase the value of your benefit over time to account for inflation.
• Non-Forfeiture Benefit. Policies with this benefit will continue to pay for your care even if you stop paying premiums. This policy feature can add 10 percent to 100 percent to your premium.

Policy Features

Make sure that your long-term care insurance policy:

• Does not require that you spend time in a hospital before receiving benefits.
• Will be renewed as long as you pay the premiums.
• Lets you stop paying premiums once you begin receiving benefits.
• Has one deductible for the life of the policy.
• Automatically covers pre-existing conditions if you disclosed them when you applied.
• Offers five-percent compound inflation protection.
• Allows you to downgrade your coverage if you cannot afford the premiums.
• Includes coverage for dementia.
• Clearly explains when you will be eligible for coverage and how your eligibility will be determined.

Being a Wise Consumer

If you are purchasing your policy from an insurance agent, talk to several agents who specialize in long-term care insurance. Compare prices and benefits. Never buy from a door-to-door salesperson and never pay in cash. In addition, don't buy more than one policy.

Check the financial stability of the insurance provider. A policy is only as good as the company behind it. Several independent companies rate insurance companies. See below for information about contacting these agencies.

Insist on reading the entire policy contract, not just an outline of coverage. Pay special attention to how you will become eligible for benefits. What levels of need must you exhibit? How will your need be judged?

Review your policy carefully during your 30-day "free look" period. If you are unsure or uneasy, return the policy for a full refund.

Check Out Your Insurance Provider

Contact the rating agencies listed below to check on the financial stability of your insurance provider. Some ratings companies charge a fee for this information. Be sure to ask the company for an explanation of what its ratings mean. Find out how many different rating categories a company has, and what is considered a good rating by the company.

• A. M. Best : (908) 439-2200 x4742
• Fitch, Inc. : (212) 908-0800
• Moody's : (212) 553-0377
• Standard & Poor's : (212) 208-1527
• Weiss Research : (800) 289-9222

For More Information

United Seniors Health Council
United Seniors Health Council specializes in consumer health and health insurance issues. The council publishes a newsletter and sells books on long-term care and long-term care insurance.

National Association of Insurance Commissioners (NAIC)
NAIC represents state insurance regulators and publishes consumer information about insurance. Order "A Shopper's Guide to Long-term Care Insurance" for 50 cents from the NAIC Web site.