Selecting a long-term care (LTC) insurance policy that suits your needs requires careful planning and due diligence. If you do the proper homework upfront, you may be able to significantly reduce the emotional and financial strain on yourself and your family down the road. The process of choosing an appropriate insurance plan does not have to be a stressful one. Follow the practical step-by-step guide below to move ahead.
Step 1
Start planning early. The best time to start LTC planning is when you are middle-age and in good health. If you are 65 years of age or older, the chances of you requiring some type of long-term care services during your lifetime is 70 percent, according to the U.S. Department of Health and Senior Services. More than 40 percent of this age group will need care in a nursing home for some period of time. The older you get, the higher the risk of you developing an illness that can result in higher premiums or even rejection by insurance companies.
Step 2
Choose the benefit amount and elimination period. You may be asked to select a daily benefit amount that typically ranges from $50 to $500 per day. Some policies specify benefits in terms of monthly payouts. As a frame of reference, the average cost of a nursing home stay exceeded $5,000 per month in 2009. You also get to specify a maximum lifetime benefit for the policy, such as $100,000. Most LTC policies have an elimination period, or waiting period. For example, an elimination period of 30 days means that benefits will be paid 30 days after you begin using long-term care. This is equivalent to the deductible you have to pay out-of-pocket before benefits begin. Choosing a longer elimination period can help reduce your premium.
Step 3
Choose the type of services covered. You have a choice of comprehensive or facility care only. Comprehensive policies cover a wide range of care settings, including at-home care, while facility-care-only policies pay for care in a nursing home or assisted-living facility, but not care provided at home or in the community. Most people nowadays choose comprehensive coverage for its flexibility, even though it is more costly than facility-care only.
Step 4
Consider getting inflation protection. As one of the most important options you can select for your LTC insurance, inflation protection helps you keep pace with the escalating costs of nursing home and personal care services. The younger you are when you initiate the policy, the more important it becomes to have inflation protection. However, inflation protection does significantly increase your premium.
Step 5
Shop around. Once you have set a framework for the provisions you desire for your LTC insurance, you are ready to shop around. Most people buy long-term care insurance directly from an insurance agent, financial planner, broker or through membership in an association. Insurance companies must be licensed in your state to sell LTC insurance. Contact your state's Department of Insurance for more information regarding the insurance companies licensed in your state.
Tips and Warnings
- Take your time to understand the contract. If you sign a contract without understanding all of its provisions, you are handing over control of your future to someone else. Never sign a document with blank spaces in it. The insurance form is a legal contract you enter into with the insurance company. You have the right to insist that the document be complete before you sign.
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