How To Buy Long Term Care Insurance

If you want to buy long term care insurance (LTCI), the first thing that you must do is to find a good long term care insurance agent. Ideally, you want someone who has expertise in dealing with long term care insurance and/or has been recommended to you by someone else.

Speaking with someone who has previously used the services of a specific agent can be very beneficial, as you will quickly be able to gain first hand knowledge as to whether or not that agent is a good choice to go with and why.

You may even get lucky and find that your own insurance agent is able to help you to construct a good policy, but if they are unable to do so, it is still worth asking to see if they can recommend anyone else to you. In addition, asking your financial planner or accountant may also prove fruitful.

Whoever you decide to go with, a good insurance agent should be able to listen to your specific needs and requirements first, and then offer you a quote based on what you have said. Be very wary of agents who offer you a quote before they have heard exactly what sort of insurance policy you are looking for, as they are likely to have their commission in mind rather than your best interests at heart.

Buying The Right Long Term Care Insurance Policy

Perhaps the most important part of buying long term care insurance, is designing your policy to meet your exact needs and requirements.

Such a policy will adequately insure you against the majority of costs that you face as a result of having to pay for a professional caregiver, such as a registered nurse, to look after you. This in turn will also help to minimize your uninsured expenses, meaning that less money will leave your pocket for the care that you receive.

Having the wrong policy however, can result in you not being insured for important expenses, or not having enough coverage to pay for the care that you require and then having to pay for it yourself.

So by taking the time to form the right coverage policy now, you will be able to save yourself a lot of potential problems in the future. It will also help to give you peace of mind knowing that you will be properly looked after for the duration of your care.

The best way to create a LTCI policy is to formulate one with your insurance adviser or agent. They will be able to assess your current circumstances such as your age, level of health and any family history of illness or disease that you may have, and then create a coverage plan for you with those factors in mind.

However, there are some things that you should start thinking about now before you go to see your insurance agent. These include:

• Costs
• Waiting period
• Location
• Length of care
• Inflation coverage

In the rest of this article, we will go over each of these points and tell you about some of the things that you should take into consideration when formulating your insurance policy. Taking the time to think about such things now will not only make it a lot easier to create a coverage plan when you see your insurance agent, but it will also help you to get the right policy for your specific needs and requirements.

This is especially important if you or someone you know has not used a particular insurance agent before, as you need to be careful that you do not end up being over insured so that you can keep the cost of your policy at a reasonable level. Since insurance agents work on a commission basis, it can be quite easy to over insure yourself if you have little or no idea about the policy that you are thinking of taking out.

However, just as you do not want to over insure yourself, you also do not want to under insure yourself. Being underinsured may result in you not receiving sufficient coverage, which subsequently, will increase the amount of uninsured losses that you suffer as a result of your inadequate coverage.

So there is always a fine balance that needs to be made between the level of coverage that you are receiving, and the total cost of maintaining that policy. The ideal policy, is therefore one that you can comfortably afford, whilst also providing you with the level of coverage that you need and require.

Let’s now have a look at each of the five things that you should be taking under consideration when creating a LTCI policy.

1) Monthly Benefit (cost)

To find out what sort of monthly costs you could be looking at for long term care, you need to calculate some average costs in your area.

One way in which this can be done is by looking at daily semi-private room rates in various nursing homes and then averaging all the values that you have. Alternatively, if you want to receive care at home rather than in a nursing home, look at home care costs and calculate the average cost from the figures that you have collected.

With your average value, multiple it by 30 to determine how much monthly LTC insurance coverage you will need. With your monthly figure, you will then be able to determine the cost of the coverage that you are likely to need for a specific duration of care in your home or in a nursing home.

For younger adults, this coverage period is likely to be lower than for older adults, as generally, older adults will require care for a longer period of time. The length of care that you should insure yourself for will be covered in more detail in a following section.

Another factor that can influence your monthly costs is the type of assistance that you require. For example, if you think that you may need assistance throughout much or all of the day, then your costs are going to be higher to receive this level of care.

The reverse of this is also true. So if you think that you will require assistance for only a few hours each day, such as to help you eat, get dressed or bathe, then you can expect your overall costs to be lower.

There is however, a difficulty in determining the type of care that you will require, and therefore the associated costs, as you cannot exactly predict what is going to happen to you in the future that will result in you requiring assistance from a caregiver.

Although in general, younger adults may wish to plan for short term assistance due to injury, and older adults plan for longer term assistance due to a degenerative disease that progressively gets worse over time.

2) Your Waiting Period

A waiting period for long term care insurance is just like having a deductible on your car insurance. It is an amount of time that you are willing to pay for your care, before your LTCI coverage begins and your insurer pays out for any claims that you make.

Generally, you can purchase a 30, 60, 90, 180 or 365 day waiting period. The longer your waiting period is, the less expensive your insurance premiums will be.

For most people, a 30 or 60 day waiting period tends to be the best option. Although ultimately, the waiting period you choose will be determined by how much you feel that you can afford, whether you are comfortable spending money for that amount of time and whether or not you get enough premium savings to justify the extra risk that you are taking on.

To help make your decision easier, you may want to choose a longer waiting period if you are trying to reduce the overall cost of your policy and have sufficient money saved up in the bank to pay for that period.

A long waiting period may also be beneficial if you think that you may require care for an extended period of time. This usually applies to individuals who are at risk of suffering from degenerative mental disorders such as dementia and Alzheimer’s disease or medical conditions such as arthritis or osteoporosis.

A shorter waiting period may be chosen if you have limited funds and cannot afford to pay for care during a long waiting period. Although it should be remembered that this will come at the expense of higher premium rates.

3 ) The Location That You Will Be Looked After

If you are looking at nursing homes to provide you with long term care, do not limit yourself to specific homes. The reason for this is that you never know what type of care you will need, and therefore, you want all options to be available to you so that you can get the best and most appropriate care possible.

If you want to be looked after in your own home, then it is better to buy a 100% coverage plan so that you can again receive the best and most appropriate care for your condition.

You may also want to look at the costs involved of receiving care in different locations. You may find for example, that home care will be cheaper and a more appropriate option than being looked after in a nursing home. If you are a young adult, then you are most likely to require assistance at home anyway and so a nursing home may not be a viable option for you.

For older adults, nursing homes are usually the most appropriate location to receive care, especially if a caregiver is required to attend to your needs throughout most of the day.

In such cases, you can look into the costs of receiving care throughout different parts of the country, as you are likely to find that costs will vary considerably depending on the specific location a nursing home is situated. Nursing homes by coastal areas or in city centers for example, tend to be the most expensive. Whereas those on the outskirts in less populated areas, tend to be the least expensive.

As the cost of receiving care can influence your decision as to where you go, you may even consider being cared for in another country as this can potentially offer very significant savings. However, your insurance policy must allow for this, and not everyone may be happy receiving care in another country as they will be situated far away from family members.

4) Length Of Care

The length of long term care coverage that you take out will be dependant on two factors.

The first, is how much money you have saved up. If you want to pass money on to your children, and therefore protect your children’s inheritance, you may consider purchasing long term care insurance for 10 years, or even take out a lifetime policy. Alternatively, you may want to protect a certain amount of assets from Medicaid eligibility. In which case, you would purchase enough coverage to get the level of protection that you need.

The other factor which can affect how many years of coverage that you take out, is the type of assistance that you think you will need. However, since this is something that you cannot always predict, it can be a difficult factor to incorporate into your decision making process.

But with that said, the previous point that was made in this article still applies. Younger adults are likely to require a shorter period of care and so can usually insure themselves for less time, whilst older adults are likely to require a longer period of care and so should insure themselves for more time. Both young and old however, would do well to have a minimum of two years worth of LTCI coverage.

Another factor that can influence the length of care you receive is your family medical history. If anyone in your family suffers from dementia, Alzheimer’s disease, arthritis, circulatory disorders, vision problems or any other forms of disability, then taking out a longer rather than shorter term insurance policy is usually the best option to go for as such disorders will require a much longer period of care.

5) Inflation Coverage

If you buy long term care insurance in advance, you are unlikely to know for certain when or if you will ever need to use it. As a result, an insurance policy which you buy today may cover current long term care costs, but it is unlikely to cover such costs in the future due to the rising cost of medical care.

For this reason, it is important to have some kind of inflation coverage on your long term care insurance policy. This will protect you against price rises, and help to ensure that you will receive sufficient coverage in the event that you do require long term care sometime in the future.

Although there are many different options available to protect your insurance policy against inflation, there are two options which tend to be the most cost effective whilst also providing you with the best level of coverage.

1 – Automatic Increase

This is an automatic increase in your LTCI policy that is tied to the consumer price index.

This allows your benefit to increase without you having to pay extra in premiums, although the price index used for long term care costs will usually be higher than the general consumer price index change. This means that your benefit will increase more slowly over time.

Automatic increase tends to be the best option for younger people, especially if there is no cap on the percentage of increase.

2 – Compound Interest Adjustment

Most insurance agents tend to recommend compound interest adjustment on your LTCI policy. It involves a 5% compound interest annual adjustment on the benefits that you receive, without you having to pay extra in premiums.

However, because your premiums will not increase, this also tends to be the most expensive inflation option due to the higher starting premium rates. As a result, compound interest adjustment is generally only recommended for older individuals.