Should I buy long-term care insurance?
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Four key reasons to buy long-term care insurance
1. Preserve your assets for your family instead of spending the money on
long-term care.
2. The odds are one-in-three that a man over 65 will need long-term care; for a
woman over 65, the odds are one in two.
3. New rules make it hard to qualify for Medicaid.
4. Premiums may be partially tax-deductible
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Typical policy features
The best policies pay for care in a nursing home, assisted living facility or
at home. Benefits are typically expressed in daily amounts, with a lifetime
maximum. Some policies pay half as much per day for at-home care as for nursing
home care. Others pay the same amount, or have a "pool of benefits" that can be
tapped as needed.
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Elgibility triggers
Make sure you know when benefits kick in. The policy should state the various
conditions that must be met.
1. The inability to perform two or three specific "activities of daily living"
without help. These include bathing, dressing, eating, toileting and
"transferring" or being able to move from place to place or between bed and
chair.
2. Cognitive impairment. Most policies cover stroke, Alzheimer's and
Parkinson's disease, but other forms of mental incapacity may be excluded.
3. Medical necessity, or certification by a doctor that long-term care is
necessary.
4. Prior hospitalization. Some older policies require a hospital
stay of at least three days before benefits can be paid. This requirement is
very restrictive and should be avoided.
5. A benefit period that may range from two years to lifetime. You can keep
premiums down by electing coverage for three to four years -- longer than the
average nursing home stay -- instead of lifetime.
6. A waiting or "elimination" period. Premiums will be lower if you pay for an
initial period of care yourself instead of electing first-day coverage.
7. Inflation protection is an important feature, especially if you are under 65
when you buy benefits that you may not use for 20 years or more. The best
inflation provision compounds benefits at 5% a year.
8. Guaranteed renewable policies must be renewed by the insurance company,
although premiums can go up if they are increased for an entire class of
policyholders.
9. Waiver of premium, so that no further premiums are due once you start to
receive benefits.
10. Third-party notification, so that a relative, friend or professional
adviser will be notified if the policyholder forgets to pay a premium.
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Optional Features
1. Restoration of benefits. This feature ensures that maximum benefits are put
back in place if you receive benefits for a time, then recover, and go for a
specified period (typically six months) without benefits.
2. Nonforfeiture benefits return a portion of premiums or keep a lesser amount
of insurance in force if you let the policy lapse. This provision, required by
some states, adds to the cost of the policy.
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