LONG TERM HEALTH INSURANCE

The Basics of Long Term Care Insurance

The harsh realities of aging in America are coming into sharp focus. Soon, a 95-year-old baby boomer without long term care insurance may have to rely on a 90-year-old spouse or a 70-year-old son or daughter for personal care.

Consumers can't rely on Medicare, Medicare supplementary insurance, or health insurance to help them meet long term care costs. They don't cover most long term care expenses.

When to Buy a Long Term Care Policy

When buying long term care insurance, your age is a primary factor in determining its cost. The younger you are when you get the policy, the cheaper your premiums will be. Of course, you also will be paying those premiums for a longer period of time before taking any benefits.

A good time to buy long term care insurance is between ages 50 and 55, according to the American Health Care Association (AHCA), a federation of 50 state health organizations representing assisted living, nursing facility, long term care, and subacute care providers. A policy that costs you $800 annually when you're 55 will cost you nearly twice as much if you wait to buy it when you're 65.

There is an exception, however. You might want to purchase a long term care policy before age 50 if your employer sponsors an attractive long term care group plan at an affordable price.

Most insurers won't sell you long term care insurance if you're over 85 or if you have a pre-existing medical condition such as heart disease or diabetes. A reputable insurer only sells long term care policies to reasonably healthy people who are at low risk of needing their benefits in the foreseeable future. So beware of policies and premiums that sound too good to be true.

Important Policy Features

The most crucial factor when choosing a long term care policy should be its benefit triggers, the set of conditions that must exist before you begin receiving coverage. Ordinarily, you must have an acute medical condition that requires skilled nursing care before your benefits kick in. The best, and most expensive, policies allow you to start receiving benefits if you suffer from a cognitive impairment such as Alzheimer's disease, even if you can bathe and dress yourself.

Bathing is one of several activities of daily living, or ADLs, which are the most commonly used benefit triggers. Your benefits begin when you are no longer able to perform a certain number of ADLs without assistance. (Your policy will determine that number. A good LTC policy will require the inability to perform two ADLs.)

A good long term care policy also will cover all levels of care — including custodial or personal care — in a variety of settings. Those settings include:

• Adult day care: Sites that provide personal and skilled care, and recreational services.
• Assisted living facilities: Living quarters that provide individualized personal care and health services for people who need help with personal care.
• Facility care services: Licensed agencies that provide skilled nursing care, speech, physical, or occupational therapy, or help from health aides.
• Nursing facilities: Residential sites for people who need daily medical care. Many nursing home stays are for a short rehabilitative period after an acute illness or injury such as a hip fracture.

Make sure you know exactly what types of services and facilities are covered by your long term care policy. If you don't go to the right kind of facility, your insurance company can refuse to pay for your care.

You also should investigate whether your policy has a nonforfeiture benefit, which is additional long term care coverage you can buy that protects some of your policy's value if you drop your policy or let it lapse. While this benefit offers some protection for your investment, it will raise your premiums. If you are confident you will be able to pay your premiums, even if there are future rate hikes, you can lower your costs by passing up this option. See Insure.com's "Choosing among long term care insurance riders".

Waiver of premium is another important feature in a long term care policy. This provision lets you stop paying premiums during the time you are receiving benefits. Read your policy carefully to see whether there are any restrictions on this feature, such as a requirement to be in a nursing home for a period of time (60 to 90 days is standard) before your premiums are waived.

Most long term care policies sold today must be guaranteed renewable, which means the insurer guarantees you the chance to renew your policy. It doesn't mean the insurer guarantees you a fixed premium. Note: Your premium will probably increase over time. While you can't be singled out for a rate increase — no matter how many claims you file — you should know that state regulators routinely grant increases to insurance companies to cover whole classes of policies that experience a large number of expensive claims.