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The Ins and Outs of Long-Term Care Insurance

by M. Sanders

If you aren't considering the purchase of long-term care insurance as part of your retirement planning, then your plan isn't complete. I'm not saying everyone needs long-term care (LTC) insurance, but I am saying you need to educate yourself about the issues and decide how you want to address those financial concerns.

According to a recent MetLife survey, the average cost of a private nursing home room is about $70,000 per year.

The average stay in a nursing home varies by the type of condition that put you in the facility. For example, those who suffered strokes require an average of 21 months of care, those with cancer average 36 months, and those with Alzheimer's average 96 months. There are a dizzying array of options and features you'll need to understand if you are thinking about buying an LTC policy.

What daily benefit will you need? The higher the daily benefit, the higher your premium. But you'll need to find a balance between daily benefit and cost.

How long will benefits last? The typical stay at a nursing home is between three and five years, so make sure your coverage lasts for at least that long. Think about your own family's health history when choosing benefit periods. Have family members traditionally lived to ripe old ages or had dementia problems? If so, you may want a longer benefit period. Many policies offer unlimited benefits, although that gets expensive.

What's the elimination period? The elimination period is comparable to the deductible on your other insurance policies. Your long-term care policy won't begin paying out for a

Cars at up to 90% off the book value!

certain number of days. Medicare typically pays for about 20 days. Most policies start with a 30- to 90-day elimination period, but you can increase that. The longer the elimination period, the cheaper your premium. Consider, too, that you may be able to pay out of pocket for six months or even a year of care. It's the long haul that might sink the financial ship.

Is the benefit inflation-protected? Go for the guaranteed annual inflation increases rather than the opportunity to increase daily benefits down the road. This rider may be more expensive up front, but you have a better chance of keeping pace with inflation.

Is the policy guaranteed to be renewable? This language guarantees that you can continue the policy as long as you pay your premiums. That includes coverage even if the company stops selling policies. This language does not, however, guarantee that your rates won't go up.

What level of care does the policy cover? The policy should cover all levels of care, both skilled and nonskilled. Nurses are generally the ones providing skilled care. Nonskilled care includes assistance with activities that don't require a nurse, such as bathing, walking, and dressing. You should be able to use the benefits not only for care at a nursing home but also for home health care, day care, or assisted living.

Does the policy cover help at home? Some policies will cover the costs of bringing people into your home to help with physical therapy, bathing, dressing, walking, and so on. Make sure the policy doesn't require a prior hospital stay before this benefit is available.

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Does the policy cover mental conditions? Sadly, Alzheimer's disease is a reality for many people. Be sure your policy includes all types of dementia.

How are premiums waived? A typical policy will waive premiums after 90 days of skilled care. Check to see if the days must be consecutive. Also, find out when premiums kick back in if you get better and go home.

How financially stable is the insurer? Research the financial rating of the company offering the policy. Check out ratings at A.M. Best's Web site. Several long-term care insurers have gone out of business. If you have a policy with a company that goes under, you still have a binding contract with that company. You do not have to surrender your contract unless you feel it is in your best interest.

Is the policy tax-qualified or nonqualified? In 1996, the Health Insurance Portability and Accountability Act was passed. Part of that law was a tax distinction for long-term care policies.

A qualified policy allows you to deduct premiums as a medical expense, up to certain limits, (to the extent all medical expenses exceed 7.5% of your adjusted gross income). Benefits from qualified policies are not considered taxable income (up to a limit of $240 a day for 2005). A doctor must certify that the insured will be unable to perform two or more activities of daily living (eating, going to the bathroom, moving from a bed to a chair, bathing, dressing, or maintaining continence) for the next 90 days or that the insured has been diagnosed with cognitive impairment (such as Alzheimer's). All policies issued before 1997 are

considered qualified. The vast majority of policies issued today are qualified.

A nonqualified policy does not require a doctor's certification to pay benefits, but they set their own internal triggers of when to pay out benefits. For example, the policy may not include bathing as one of the daily living activities (and bathing is the number-one activity that people need help with). And you don't get the tax breaks that you would with a qualified policy. Do your homework on the companies issuing these policies to make sure they are financially solid.

For the complete article click on T he Ins and Outs of Long-Term Care Insurance.

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Some online resources for Long-Term Care Insurance include:

Allianz LTC Insurance

GE Long-Term Care Insurance

John Hancock LTC Insurance

Long-Term Care Insurance from MetLife

About the author:

M. Sanders is a long term care insurance marketing specialist. She is appointed throughout the United States as a long term care insurance representative with several major insurance carriers. Her website, About Long Term Care and LTC Insurance, contains information and articles pertaining to long term care, insurance and other related senior topics. It is her goal to inform the public about these

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