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Long Term Care Insurance 101

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Long Term Care insurance pays expenses if you need long term care at home, in an assisted living facility or in a nursing home. According to a study by MetLife, as of 2011, the average daily rate for a stay in private room in a nursing home was $239 or $87,585 a year - and prices are expected to continue to go up. (If you have later numbers, please e mail them to dlanday at survivorshipatoz dot org).

Common wisdom is that prime candidates for long term care insurance are people with assets to invest between $200,000 and in the $2 - 5,000,000 range. People with a lower amount of assets generally can't afford the premiums and may qualify for Medicaid either because of the current situation or by spending down assets. (For information about how to qualify for Medicaid, click here.)  People with assets over $2,000,000 can usually afford the necessary care depending on how easily the assets can be converted to cash.

If you have a history of a serious health condition:

  • Health conditions are reasons for denials or higher rates. You may have to wait a period of time such as 12 months after there is no longer evidence of disease before being able to obtain a policy.
  • Shop around if one insurer rejects you, charges a higher rate or imposes a waiting period before coverage starts.
  • You may be able to get coverage through an employer or other group where no health questions are asked. The federal government is one such employer. To learn more about the government offers, call: 800.582.3337 or visit: www.ltcfeds.com offsite link
  • Keep in mind that if you lie about your health history on an application and the company issues a policy, the company generally has the right to refuse to pay a claim when it learns the truth.

When considering which Long Term Care policy to purchase, look for a policy that provides the following::

  • The coverage you need. 
    • The cost of long term care depends on the severity of the disability, the amount of care which is required and your location. 
    • To learn the costs of nursing home care, assisted living care and home care in your state, see Met Life's Mature Market Institute: www.metlife.com/mmi offsite link Look for "what's new". 
    • Because long term care insurance premiums are so high, only buy coverage that you really need. For example: A daily rate that reflects the costs in the area in which you are most likely to receive care. (Costs may be cheaper across the state line if you live near a border.)  Long Term care insurance does not have to cover 100% of the daily rate if you are likely to have enough assets to pay the different out-of-pocket. It should at least cover significantly more than 50% of the cost if possible.
  • A price you can afford now and in the future.
  • Built-in protection against inflation so the benefit doesn't become less meaningful or even worthless by the time you need it. (This may not seem important when inflation is low, but history shows that low rates of inflation cannot be counted on.)
  • Benefits for the period of time you'll need. Lifetime coverage is now rate - and is very expensive if offered. According to Bottom Line Personal, two-thirds of people who enter a nursing home stay less than one year. Only 10% stay five years or longer.
  • An elimination period that makes sense for you and the amount of premium. The elimination period is the number of days taht you must pay out-of-pocket before coverage starts. 
  • An insurer with the financial stability to have the funds to pay if and when you file a claim.

Before buying a policy, consider the following tips:

  • Are there alternatives that would work as well for you? For example, you can tap the death benefit of a whole or universal life insurance policy or the balance in an annuity to cover long term care expenses tax-free.
  • The period of time. 
    • The longer the coverage, the more expensive. The American Association for Long Term Care Insurance surveyed insurers and found that 92% of buyers who have benefit periods of three-years, and eventually file a claim, do not exhaust their benefits. 
    • If you do exhaust your benefits: If you live in a state with a "Partnership,"  you may qualify for Medicaid while protecting assets up to the amount of the benefits that were paid while you were receiving Long Term Care.
  • A lower daily benefit than the cost of care in your area if you can afford to make up the difference.
  • How much of the premium may be deductible from income as a medical deduction. For information, click here, and scroll to "Long Term Care".
  • To quote Bottom Line Personal: "Don't just purchase the policy that offers the lowest premiums for a given level of coverage. Historically, the long term care insurers that offer the lowest premiums tend to later impose the steepest rate increases and/or decline the highest percentage of clalims. Instead, ask agents for the premium increase history and claim-approval history of every long term insurer from which you receive quotes. Your state insurance department should also be able to provide these figures."
  • If you are married, look for Joint Coverage - one policy covers both partners. Premiums are generally less than the cost of two separate policies.
  • A Partnership Policy can help you keep savings after long term coverage ends, and still qualify for Medicaid. (For information about Partnership policies, see below.)
  • A so-called hybrid policy which combines the features of a long term care insurance policy and either a life insurance policy or an annuity. (If you are considering this option, keep in mind that the long term care benefits are usually limited, and the cost of the life insurance element is usually expensive.)

If you don't buy a policy and need help figuring out how to obtain long term care and how to pay for it, contact your state Long Term Care Ombudsman. (To locate an Ombudsman in your area, see: http://theconsumervoice.org/get_help offsite link)

Because prices and coverages vary, and it may be difficult to find a policy with a health history, it is advisable to work with a broker who specializes in Long Term Care Insurance and deals with several insurance companies. He or she is likely to know which companies will be favorable to your situation. Or you can purchase Long Term Care Insurance on line. It can be difficult to compare policies because there is no standardization.

If you don't have a broker, you can locate one in your area through American Association of Long-Term Care Insurance: www.aaltci.org/agent_locate.html offsite link, Tel.: 818.597.3227,

When you receive your copy of a policy, check it over. You have 30 days to review it and send it back if it's not what you want.

There are steps to take to reduce the risk that the policy will unintentionally lapse or a claim won't be filed in a timely manner, or at all.

If you have an older policy with limited coverage, find out if the insurer will add an amendment (a "rider") to bring it up-to-date. Alternatively, try to buy a second policy for the extra coverage.

Claims under a Long Term Care Insurance policy are usually straightforward. It is advisable to inform the person or people closest to you of the claims requirement in advance so they can take the necessary steps if you are unable to.

If your claim is turned down, it is generally worthwhile to appeal.

NOTE: Long Term Care insurance premiums are deductible as medical expenses, subject to a maximum. 

For more information, see:

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