Here are some questions to consider if you’re contemplating whether to buy an LTC (long-term care insurance) policy.
Today, LTC policies offer lots of choices, including how many years you want to collect benefits, how much per day, where you want to receive care and if you want inflation protection. Also, as people are living longer and dealing with dementia and other aging issues, a number of companies have dropped out of the LTC market altogether because it was no longer as profitable. Large group plans have struggled recently with higher-than-expected claims and rate increases of as much as 85 percent. Many companies have had to initiate rate increases of 40 percent or more to cover unexpected expenses due to a high number of claims.
Q: What is long-term care insurance?
A: Long-term care (LTC) insurance is designed to cover assistance with daily living activities, such as bathing, dressing, eating, toileting and moving from bed to chair. Generally, LTC policies kick in when a person needs help with at least two of those categories, either short-term or longer. The cause can be due to illness, injury or onset of dementia and Alzheimer’s disease.
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Q: Where can the insurance be used?
A: The care can be provided at home or in adult day care, a nursing home, assisted-living or residential care facilities.
Q: How do I get a policy?
A: LTC policies are sold individually by licensed insurance agents, but also offered by some private employers, group plans or federal/state employers.
Q: Who needs an LTC policy?
A: There’s no easy answer. Somebody who has $30,000 in income can’t afford the same premiums as someone with $250,000 in income. If you’re a renter with $20,000 in savings, long-term care coverage is not for you, for example; Medicaid will likely cover your expenses.
Some choose to self-insure, feeling confident they can pay out-of-pocket should the need arise. Others prefer to buy a policy so they don’t drain money from funds or assets they want to pass on to their children.
Q: What’s the best age to buy an LTC policy?
A: The average annual premium is approximately $2,000 to $3,800, depending on your age and whether you are single or married, according to the American Association for Long-Term Care Insurance. If you buy young, you have a better chance of getting a decent rate.
Generally, it doesn’t make too much sense to buy a policy before your mid-50s, Reilly said. But family medical history should be included in making your decision.
And be prepared to be quizzed before you buy a policy. Many insurers are more closely scrutinizing your medical history, even asking for cognitive tests, before agreeing to issue a policy.
Q: Where should you start?
A: Talk to a licensed insurance agent who has been certified to sell LTC policies. You want a company with a good track record and minimal number of rate increases.
Q: What if you’ve got an existing policy but get hit with a big rate increase?
A: If you get a letter about a rate increase, carefully review it. Some companies raise premiums at certain ages, like 65 or 70. Other companies re-evaluate their policies and raise premiums based on unexpected levels of claims.
Q: How cost-conscious should people be when buying these policies?
A: “It’s hard because these policies are expensive,” said Burns. “There’s no easy way to make an apples-to-apples comparison, so people tend to buy based on price. But if you buy a lower-priced policy, you might very well buy something that’s going to have a rate increase down the road.”
Although the state Department of Insurance and others offer online rate comparisons that will give you an approximate price for premiums, based on your age and type of coverage, exact policies vary from company to company. The older you are, the higher the premium.
Q: What’s the best advice for someone contemplating buying an LTC policy?
A: Do a lot of research. Get second and third opinions about what a policy will cover should you need care. Nobody needs 100 percent coverage for their long-term care costs. It should be a combination of what you can afford to pay in premiums and what you might need in coverage.
Before you buy a policy, sit down with a HICAP counselor who can give you an independent assessment of whether the coverage works for your needs.