What long-term-care insurance can do for you and your family

Many people are struggling with the decision of whether or not to buy long-term-care insurance.

The decision has never been more difficult. Some research cites that 70% of individuals 65 and older will need long-term care— either at home, in an assisted-living facility or nursing home. However, the price of long-term-care insurance keeps going up.

For some people, of course, long-term-care policies make no sense. Medicaid is there to help people who have little money. (Medicare doesn't typically cover continuing care.) People with assets of $2 million or more, meanwhile, can probably afford to pay for long-term care out of pocket, although a policy may still make sense to ensure they have money to leave to their heirs.

The decision to buy long-term-care insurance is especially challenging for people who fall between those two extremes.  Policies are complicated and the industry is undergoing a great deal of change. Carriers are raising prices as well as leaving the business.

The following are some mistakes cited as those people commonly make when purchasing long-term-care insurance:

1. WAITING TOO LONG TO PURCHASE
Many people don't even start thinking about long-term-care insurance until they reach 60. And by that time, it may be too late—either because the insurance is too costly or they simply can't qualify for health reasons.

As a result, for most people, the 50s are the best time to buy a policy. That's typically when premiums are most affordable and coverage is easiest to obtain.

Those who wait also run the risk that their health may deteriorate. Carriers, which have become stricter about how they underwrite policies, reject about 25% of applicants between ages 60 to 69.

2. PURCHASING BASED ON PRICE ALONE
The gap between the least- and most-expensive policies can be wide. But while price is important, so is reliability. Articles suggest that individuals rely on larger, stable carriers with the resources to still be around when the coverage is needed - preferably those that are diversified and have a claims-paying-ability rating of single-A or better.

3. NOT CONSIDERING SHARED BENEFITS
Using this benefit, although a bit more costly, is an inexpensive way to increase the benefits available to one spouse. Some couples do not realize that they can receive a discount of up to thirty percent if they purchase their policies together.

4. NOT CONSIDERING INFLATION
If you purchase insurance in your mid-50s and don't need coverage until your mid-80s, 30 years of inflation is going to consume a large part of the benefit.

Buying inflation protection can add 50% or more to the cost of a premium. Perhaps for that reason, 94% of people who buy hybrid policies, which package long-term-care coverage with a life-insurance policy or an annuity, and nearly one-third with conventional policies forego the protection or choose less suitable coverage.

5. NOT READING THE FINE PRINT
Some families with long-term-care insurance policies encounter claims denials that can prevent or delay the collection of benefits. The key to avoiding such difficulties is to be familiar with the definitions and terms of the contract so you will know when and how you can use the benefits.

The majority of long-term-care contracts pay benefits under one of two conditions: The policyholder must be unable to perform two out of six basic "activities of daily living," such as dressing or bathing, or have a cognitive impairment requiring "substantial supervision". These conditions are found in all tax-qualified policies, meaning the benefits are not taxed as income and the premiums can sometimes be deducted as medical expenses. Policies usually require a medical professional to state that they expect the condition to last 90 days or more.

However, even when individuals qualify for benefits insurers do not always pay claims right away. Additionally, there is usually an "elimination period" that a policyholder has before benefits commence.

Many contracts mandate the use of home-care agencies with specific licenses. Gentle Home Services, Inc. is recognized by most reputable long-term-care insurance companies. Additionally, our staff will manage the claims paperwork free of charge.

6. NOT COMPARING HYBRIDS AND CONVENTIONAL POLICIES
More affluent buyers currently seem to be attracted to hybrid or combo policies. This type of combination usually includes long-term-care coverage with a life-insurance policy or an annuity.

One attraction to hybrid policies: Customers can pay for the entire premium up front, and so effectively lock in a price for the benefits. With conventional policies, buyers theoretically lock in a steady, stable premium, but in reality, carriers have raised premiums on these policies in recent years. In addition, when hybrid policyholders die without using their long-term-care coverage, their heirs receive a death benefit.

There are some drawbacks to hybrid policies. They can come with additional fees that are usually part of the life-insurance in addition to the morbidity charges that are part of traditional long-term-care insurance policies.

One article cautioned that when policyholders start to receive long-term-care benefits, they must deplete the death benefit before they can access any of the additional long-term-care coverage they purchased. So there is no guarantee that their heirs will receive any life insurance, he says.

While the benefits on both types of policies are tax-free, only individuals with traditional policies can deduct their premiums. Additionally, only traditional policies qualify for the government endorsed Long Term Care Partnership Program, which allows those who outlive their coverage to protect some of their assets and still qualify for Medicaid.

When researching information on long-term-care insurance, you may want to visit:
U.S. Department of Health and Human Services - longtermcare.gov
American Association for Long Term Care Insurance
National Association of Insurance Commissioners
Forbes

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