The Fine Print on Long-Term Care Insurance

By: Steve Dahl

The good news is - we're all living longer! The bad news is - we're all living longer! As the price of everything goes up, so does growing old. Fortunately we now have some financial tools to help make the golden years more comfortable emotionally, physically and financially. One possible solution may be long-term care insurance (LTCI). But don't jump on this premium bandwagon until you understand what you're committing to. Like most insurance, we don't really know how well it works until we really need it. Here is some of the fine print to examine if you're considering a long-term care insurance policy.

Long-term care is often considered an issue exclusively for elders. Not so. Anyone who needs ongoing care because they cannot independently perform the basic daily living activities such as dressing, bathing, or eating due to an injury, illness or even cognitive disorders may be a candidate for long-term care. Affording long-term care is something that concerns many of us and one way to deal with the unpredictable long-term care costs may be long-term care insurance (LTCI).

Hopefully you'll live a long and prosperous life and health or money issues won't cloud your golden years. But, if you want to be prepared, consider how to make long-term care insurance work to your advantage. Don't count on Medicaid. It does cover a bit of your long-term care expenses but you've got to be dang near death or flat broke or a combination of the two to qualify. Then there's your friendly neighborhood HMOs, Medicare, and Medigap but guess what. Right. They don't help much either.

Here are three things you can do to get over your anxiety about this whole not-so-fun question of "How long will I live and can I afford it if I do?"

1. Eat your dang vegetables! Your mother was right. They are good for you and they keep you healthy. In other words, clean up your lifestyle a bit and add a few more healthy years to your life.

2. Make a ton of money. Yeah, yeah, yeah, your mother told you to start saving early. If you did so and you've got some financial plans in place, good for you. If not, it's never too late to start with some basic planning and investing.

3. Buy some long-term care insurance. We all hate paying those premiums but the right kind of long-term care insurance can be a lifesaver when the going gets tough.

Eat your veggies, fill up the piggy bank, and buy yourself a long-term care insurance policy.

The first two are relatively easy; the last one has a few complexities to be aware of. First of all, get with an insurance agent you know and trust or ask a friend or your accountant or lawyer for a referral. Here is some of the even finer print to watch for when it gets down to the nitty gritty of policy comparison:

1. Elimination Complication... Or, in the insurance industry words, Elimination Period: This is the period of time before your insurance policy will actually begin paying out benefits. The typical options range between 20 and 100 days. This is also referred to as a waiting period. Make sure and ask your agent to clarify what your elimination period is and have him explain the cost/benefit considerations of making it longer or shorter.

2. Time Crunch... Or, as the insurance industry puts it, Duration of Benefits: The ceiling or limits placed on the benefits a policy holder will receive. This may refer to limitations such as predetermined set amounts of money or specific time parameters of one or two years etc. Again, compare these benefits to your other financial resources.

3. Daily Bread... Or, as the insurance industry feeds it to you: Daily Benefit: This is the amount of coverage you choose as your benefit on a daily basis. This typically ranges from $50 to $350 per day. Another consideration may be the cost of living in your specific locale. Health care in a small town in North Dakota may be less costly than health care in Los Angeles. Your agent should be able to give you some guidance on this.

4. Easy Rider... Or as our insurance friends call it, Optional Inflation Rider: The term used to describe the method of protection against inflation.

5. Done-Got-That-Bug Before Or, affectionately known as Pre-existing Conditions and we-aint-gonna-cover-your-tail-for-that-one-for-a-while rule. The insurance provider will require a waiting period (in some cases 6 or months or more) before full coverage goes into effect on treatment for pre-existing conditions. This will vary from company to company.

6. Home on the Range... Or, our insurance folks refer to this as Range of Care: In other words, coverage may vary for different levels of care. Some care may be at a skilled level, intermediate level, or a custodial level. The facility itself has a range of care definition that your agent will explain. The nursing home, assisted living facility, and/or at home care are all levels of care that come with a different price tag. Ask for clarification on this.

7. Jacking Premiums... Or better known as Premium Increases: Your policy will have terms in it that explain if, how, and when your premiums will increase. Reality check here. There is usually no "if" but there is almost always a "when." Of course your costs will go up, just make sure you know how much and if you have any options when they do. Can you reduce the type of coverage you have if your premiums increase or are you locked in? Ask your agent.

8. To Know me is to Renew me... Or more commonly referred to as: Guaranteed Renewability: This is a policy agreement in long-term care insurance policies that allows you to renew it and maintain coverage even though you may have had changes in your health.

9. Amazing Grace Period... Or in less poetic terms, Grace Period for Late Payment: If you slip up and you're a little late on your payment, this is how much time the company will allow before they do something nasty like cancel your policy. It is highly advised that you don't test just how graceful your insurance carrier can be. They don't always have the same sense of humor that this writer does.

10. No Debate Rebate... This is a fun one for a change, Return of Premium: This is the little clause that says you may get some of your money back if you haven't used your policy for a certain number of years. Remember, we did say "may get some of your money back."

11. Bed Pan Ally... Better known as Prior Hospitalization: This is the clause that indicates whether or not you must stay in a hospital before you qualify for long-term care insurance benefits.

There's obviously a lot to know with this insurance game so do your homework long before you need it. Make sure and check with a financial planner, attorney or accountant to get some guidance on this complicated topic. Not everyone needs or qualifies for long-term care insurance so ask a lot of questions and don't forget to eat your dang vegetables!

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