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HOW TO CHOOSE LONG TERM CARE INSURANCE


 Long term care is care provided to individuals who need assistance with the basic activities of daily living because of a physical or mental impairment. A prudent person will purchase long term care insurance to help finance the cost of this extended care that may someday be required.

There are many companies selling long term care insurance and most of them have very similar benefits. Each company may have a few little items that vary from another company which makes it very difficult to compare apples with apples. Premiums can vary widely between the companies.

The four most important components of a long term care policy can be customized to control the premium and to meet your needs. The first component is choosing a daily benefit. How much do you want the policy to pay you each day? You can choose a number in increments of $10.00 ranging from $50.00 to $300 per day. Presently, in the northeast an average nursing home stay is $200 per day. If you choose a daily benefit of $150, you will be covering the bulk of your expenses with your long term care policy and will only have to dip into your assets for a small portion of the expenses.

How long do you want the policy to pay you a daily benefit? Most companies will allow you to choose from two to six years, or unlimited benefits. Unlimited means the policy will always be there for you and you will never run out of coverage. On a more practical side, the average nursing home stay is still 2.76 years. A policy that will provide benefits for five years is more than adequate in most cases. Keep in mind that the clock does not start ticking on this five year period until the insurance company starts paying you a daily benefit.

The third component to long term care insurance is the waiting period which is similar to a policy deductible on your health insurance. You can choose a waiting period from zero days to 120 days. The most popular choices are 20 days, 60 days, or 90 days. This means if you choose a 90 day waiting period (also called an elimination period) the first 90 days you need the policy to pay you, you will pay out of your pocket. Benefits will then start on day 91. Many people choose a 20 day waiting period figuring they can comfortably pay the first 20 days from their assets.

The last important component of a long term care policy is inflation protection. Lets say that you buy a policy now that will provide you with $150 per day. Hopefully you will stay well for many years and not need to collect benefits, but lets suppose that 20 years from now you qualify for benefits. Twenty years from now, $150 won't go very far because of inflation. There are usually three inflation options from which to choose. You may choose 5% simple inflation protection which means every year your $150 daily benefit will increase by $7.50. Or, you may choose 5% compounded which means every year your daily benefit goes up by 5% compounded. At the end of 20 years, the $150 should be worth approximately $380 per day based on a 5% compounded inflation rider. The third option is to choose no inflation protection whatsoever. People that are in their mid to late 70's will frequently opt for this benefit but they will start out by choosing a higher daily benefit, building inflation protection into the policy from the very start. The premium that you pay is based on the inflation protection option that you choose. If you choose no inflation, most companies will allow you to increase the daily benefit every year or two, based on the current inflation rate. The premium for this additional benefit will be based on your attained age.

Some companies will waive your premium the day they start paying you. Other companies will waive the premium up to 90 days after they start paying you. Some companies will say that you must only meet the waiting period once. If you choose a policy with a 20 day elimination (waiting) period , and you qualify for benefits, you have a 20 day waiting period before the policy begins to pay. If you get well again and do not require any care, the next time you need care, the policy will begin to pay benefits on the very first day. Some companies offer a good health discount and/or a spousal discount if both husband and wife apply for coverage. Other companies offer a spousal discount even if the spouse does not buy the insurance.

The prerequisite for collecting benefits is that your doctor must state that you will be unable to perform at least two out of six of the activities of daily living for a period of 90 days or more or that you have a cognitive impairment. Activities of daily living include eating, bathing, dressing, transferring, toileting and incontinence. A good policy will pay you benefits regardless of where you are living. You may be at home, in an adult day care center, an assisted living facility, or in a nursing home. In a nursing home, there are 3 levels of care: skilled care, intermediate care, and custodial care. Ninety-five percent of individuals in nursing homes need custodial care. Medicare does not pay for custodial or intermediate care. Medicare will pay for 20 days in a nursing home if you require skilled nursing care by Medicare's definition. After the 20 days, if you still need skilled nursing care, Medicare will pay all but $97.00 per day to day 100. After that, you are completely on your own. Do not count on Medicare paying for your nursing home stay. If they do, consider it a little something extra.

Long term care insurance will protect your assets and provide you with more freedom and independence to choose where you wish to receive long term care. For more information, you should contact your insurance agent, or you may call our office at the number listed below. You may also call the National Association of Insurance Commissioners in Kansas City, MO 816-842-3600 and ask for a free copy of the booklet, "A Shopper's Guide to Long Term Care Insurance".





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