Factors in Long Term Care Insurance..

There are several newer factors in today’s Long Term Care Insurance decisions. LTC insurance isn’t the new kid on the block anymore, insurance carriers are getting a lot smarter about how they write their plans, and America’s financial advisers are getting a lot more savvy about how to choose them.

But for us consumers, it’s the same old mind-wrenching, mind-boggling confusion.

Plans offer unique riders and consist of dozens of variables, making comparisons almost impossible. Those buyers who are priced out of the most fully-featured products can’t even figure out which features to focus on and where they can economize.

“Consumers face a bewildering array of LTCI policy choices,” reports Bonnie Burns, of the advocacy group California Health Advocates, in a paper for the AARP Public Policy Institute. “And they’ll find very little independent and objective help or guidance to assist them.”

But there is hope.

As long-term care insurance finally comes of age, the policies are getting much better. Although there is still consumer confusion, there is also more information available about how much these new policies cost and what they contain, so consumers can start learning about what they’re actually buying.

Here are some points to look at if you’re looking into getting a policy.

How much will it cost?
The average cost for a 55-year-old purchasing long-term care insurance is $772-per-year. The average annual cost for a 65-year-old is $1,456. Buyers at these prices are cutting their costs with spousal discounts, good health, and 3-year limitations on their benefits.

What will it cover?
Choose a policy that covers both home care and nursing home care. Sure, if you have no assets, Medicaid will pay for nursing home care, but not for home care. Some policies will even pay relatives who can take on the burden of home-care responsibilities.

Check some care facilities in your area to get an idea of the average daily cost, so you can gauge how much benefit to buy. Some financial planners recommend buying a monthly benefit instead of a daily benefit. That gives you the flexibility to collect more benefits if your care is heavier on some days and lighter on others, giving you more flexibility.

When does it start?
The elimination period is the time you have to pay out of pocket before your policy kicks in. It’s like a deductible in other kinds of insurance, and it has the same kinds of trade-offs. The higher your elimination period (90 days is a commonly chose amount), the lower your premiums. The catch is that policies with lower waiting periods cost more, so folks who can’t afford to pay for that three-month elimination period might not be able to pay for the higher priced policy, either.

Remember, a 90-day elimination period for a daily benefit does not necessarily mean that your coverage will kick in after three months. If the policy has a daily payout, it’ll typically pay only for those days when you use care, and they may not come sequentially. It could be six months before you use up that elimination period.

What about inflation?
Some inflation coverage is crucial if you’re buying a policy when you’re in your 50s or 60s. By the time you actually need care, the benefit amount that you are buying today could be meaningless. Yet a complete, compound inflation guarantee could be cost prohibitive, adding as much as 50 or more percent to a policy’s cost. Cheaper (and less protective, but a compromise), might be buying a bigger benefit than you need today and foregoing the inflation adjustment, or buying a “simple” inflation adjustment that would increase your benefit by a set amount each year. For example, if you were buying $150 of daily coverage, and bought a simple adjustment of 4 percent, your daily benefit would move up by $6 a year, every year. If you sprang for the top-of-the-line compound benefit, it would go up by $6 the first year, and then 4 percent of $156 the second year, and so on.

How long should you cover?
The average nursing home stay is under three years, but then the average home-care experience is over four years. Or, it could be longer. The average Alzheimers case is eight years. Capping a policy at three, four or five years can be a way to play the odds and limit your policy costs. But if the point of long term care insurance is to protect you from the risk you can’t afford to cover, then buying a longer policy makes a lot more more sense, doesn’t it?

With so many unfamiliar factors, it makes sense to get free decision assistance and rate quote comparisons from your Buyer’s Advocate.

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