Long-Term Care Policies
Depending on age and policy features, a long-term care policy costs $4,000 to $6,000 a year. Genworth Financial, the largest seller of long-term care policies in the U.S., stopped selling policies in California toward the end of March 2013.
A good long-term care policy can pay for continued skilled nursing home or assisted-living care facilities, home attendants, and costs associated with recovering from an illness, injury, or dementia. Here are some of the more important questions to ask when researching a possible policy for a client:
[1] How is eligibility defined?
A person must be unable to perform certain critical activities—eating, bathing, dressing, and getting from a bed to a wheelchair. Some policies require that the insured be unable to perform six functions; other policies typically require three.
[2] What does it pay for?
Newer policies reimburse for at-home care, even if not from a certified health care professional. The policy should cover a range of facilities, including nursing homes, assisted-living facilities, adult day care, and hospices.
[3] How much does it pay?
Policy owners tend to overestimate how much their policy will pay; the policy may pay a percentage of certain costs or a percentage of “usual and customary” charges. An insurance company could say many of the expenses incurred were not covered, even if the policy is structured to pay up to $10,000 a month. The elimination period of the typical policy is 6–12 months. The state of Wisconsin publishes Guide to Long-Term Care, a comprehensive report.
[4] Is coverage affordable?
Once a policy is issued, the insurer cannot deny future coverage, but premiums can rise each year. As a general rule, if premiums equal > 7% of one’s income, it should not be considered affordable. One way to reduce the cost of a policy is to opt for coverage that pays for 1–3 years of care; most stays in care facilities last no longer than three years.
[5] Should you replace your current policy?
Make sure your client qualifies with the new company before the old policy is cancelled. Even though insurers cannot exclude preexisting conditions anymore, they can require a waiting period. Moreover, they can simply refuse to cover you in the first place. For most people, the amount of cumulative premiums paid in will be less than the amount of coverage, if any, actually used. For more information, contact the Long-Term Care Information site of the U.S. Department of Health and Human Services.