Tips for Buying Long Term Care Insurance
by Mary Damiano

The decision to buy Long Term Care Insurance should not be entered into lightly. There are many things to consider and many options available. Purchasing a policy without making and informed decision can be a costly mistake. Before buying anything, be sure to ask these questions, which serve as a basic guideline of things you need to know.

  • Have you shopped around? Talk to different companies and compare benefits. Do not buy a policy simply because it’s the least expensive; always compare the coverage. Ask each agent for an outline of coverage, which summarizes each feature of the policy. Stay away from agents who tell you this is a one-time offer.

  • Is everything you’ve been told actually in writing? Make sure that whatever you’re told about the coverage is written in the policy.

  • Do you understand everything about the policy? If there is something you don’t understand, keep asking until you do understand. Better yet, have an objective third party, such as an attorney, read the policy and explain each item to you.

  • Can you afford the premiums? The important thing to consider is not whether you can afford the premiums now, but whether you’ll be able to afford them then. Many people on fixed incomes find their policies cancelled when they can’t pay skyrocketing premiums.

  • Does your policy have inflation protection and how is that protection computed? A policy that pays $100 a day for nursing home care may sound good now, but what happens years from now when you need a nursing home and they cost $400 a day? Also, make sure the benefit for this coverage is calculated using the compounded interest method rather than simple interest.

  • Does the policy provide death benefits and non-forfeiture benefits? While these features can increases premiums, they can be nice to have. Think of them as a consolation prize. A policy with death benefits pays your estate premiums minus benefits you’ve already received; non-forfeiture benefits means that if your policy is cancelled for non-payment, you’ll get back some benefits.

  • Who decides when you’re eligible benefits? Insurance companies have different criteria for paying benefits. Some require only a doctor’s order. Others base their coverage on the policyholder’s ability to perform everyday tasks such as bathing, dressing and feeding themselves. These tasks are called Activities of Daily Living, or ADLs. When an insurance company uses ADLs as a guideline, the difference between someone being able to perform these tasks with physical assistance, supervised assistance can mean the difference between eligibility and ineligibility. 

  • Does the policy evaluate mental functions when deciding eligibility? A person with Alzheimer’s may be physically capable of performing ADLs, yet they might forget where they live and wander off or forget to take medications. Unless the policy states that they take mental functioning into consideration, the policyholder with Alzheimer’s disease may be denied coverage.

  • Does the policy require that in order to qualify for benefits, the policyholder needs “one on one continual assistance”? This is a very restrictive requirement and one that is difficult to meet.

  • Does the policy clearly explain claim-filing procedures and the policyholder’s rights to appeal decisions made by the company? It is very important that you understand exactly what you must do in order to get your benefits.

  • Have you done a personal inventory of your income and assets? This is important to see not only if you will be able to afford the policy over an extended amount of time, but also how much you can afford in out-of-pocket expenses.

  • Have you answered all medical questions truthfully? When you get a policy, companies usually ask some medical questions and some even ask for a statement regarding your health from your doctor. The company wants to make sure you’re a good risk. When you file a claim. However, the company may look for reasons to not pay that claim, so they go over your medical history with a fine tooth comb. If they discover you were misleading about your health, claims can be denied. No matter what the insurance agent says, make as a full disclosure about your medical history. If you can’t remember much, refer the company to the doctor who treated you. If you’re really not sure about something, legally speaking, “I do not recall” is a much safer answer than “I don’t know.” 

  • Have you re-read the policy and the application to make sure every piece of information is correct? Don’t sign on the dotted line without making sure every i is dotted and every t is crossed.

  • Who has the final say over whether or not you qualify for benefits? Often, and insurance company’s doctor can overrule your own doctor’s recommendations.

When it comes to buying Long-Term Care Insurance, your most valuable resource is common sense. Don’t allow yourself to give in to scare tactics. Make sure every detail is in writing because a detail can mean the difference between qualifying for benefits or being declared ineligible, and can cost thousands and thousands of dollars. If something sounds to good to be true, it usually is. There is no such thing as a free lunch. Remember that insurance companies are businesses and the only way they can stay in business is to make money and be profitable. Being profitable means that more money comes in than goes out. Therefore, the more money they can get customers to pay, and the less money they have to pay customers, the more profitable they are. Think about that before you buy anything.

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