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Seven Things To Look For In Long-Term Care Insurance

Armen Hareyan's picture

Planning for long-term care requires financial savvy when choosing long term care insurance coverage, writes Bills.com.

Americans are living longer than ever before, reaching a new life expectancy of more than 78 years and making long-term care insurance a valuable investment, especially for those who heed Bills.com president Ethan Ewing's seven things to know before buying.

Long-term care (LTC) insurance pays benefits to insured individuals who no longer can manage some "activities of daily living," such as bathing, dressing, toileting or eating, without assistance. Benefits cover various types of care, from nursing home care (such as when recuperating from a chronic injury or illness) to in-home therapy services to assisted living and adult day care.

Premiums take into account factors including benefit amount, benefit period (how long benefits are paid), cost-of-living or inflation adjustment, and elimination period or deductible (how long before benefits are paid). Many policies have tax benefits for the policy owner.

"Long-term care insurance can be a financial lifesaver at a critical stage of life," Ewing said. "But it's very important to understand what you're buying."

Ewing suggests consumers consider these seven elements before choosing LTC insurance:

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1. Know who needs coverage for long term care insurance. LTC insurance has the most benefit for people who need to protect assets, such as savings accounts, from being depleted by care costs. Those who are too wealthy to qualify for Medicaid must pay costs out of pocket until they do qualify. It is especially important to protect a spouse -- who needs assets to cover daily living costs -- from having to spend all cash on care.

2. Do not buy what you don't need. For low-income households without assets to protect, LTC insurance is unlikely to be a wise investment -- especially because premiums cost $1,000 to $6,000 per year. Those who have trouble paying bills or have very few assets probably do not need – nor can afford – LTC insurance.

3. Age matters. The sooner you purchase long-term care insurance, the better. Younger people get the best premiums because they are less likely to use the insurance soon. Typical consumers do not need to buy LTC coverage until age 50 to 55. (The exception is if a younger worker's employer offers great coverage.)

4. Know what pulls the trigger. "Triggers" are events that cause a policy to begin paying benefits. Understand the policy's triggers. Most policies require that the beneficiary no longer be able to accomplish two or three activities of daily living before they pay benefits. A doctor will need to certify that the condition is expected to last three months or longer.

5. Plan for premium increases. Choose a policy that is guaranteed renewable. This means the policy will continue as long as premiums are paid. It does not mean the premium will not increase. Be prepared for the cost to go up with time, although some major companies have not increased premiums for policy holders.

6. Non-forfeiture can help. If you are not 100 percent positive you can pay the premiums until you need the coverage, a non-forfeiture benefit can help protect some of your policy's value. But it will make the premiums higher throughout the life of the policy, so if you do not need it, avoid it.

7. Look for a waiver of premium clause. The waiver of premium clause arranges for the beneficiary to not pay premiums when receiving benefits. A waiting period of 60 to 90 days is common.

"When LTC coverage is needed, it can bring real peace of mind," Ewing said. "If it is the right choice for you, do not delay. Plan your care before you need it."



When I got my policy through Insure Your Future, the agent provided 6 policies from different companies for me to review. One criteria was financial strength of the company which factored in the decision process. Everything was laid out for me to review, ask questions, and make a decision. It was simple and straightforward.