It takes focus and discipline to research and do your due diligence before you buy Long Term Care Insurance. This is a complicated topic which is why we went to a well-known expert: Ted Kadison, President, IRG Financial Services, Inc in West Caldwell, NJ (See Part One here: ADD LINK).
The bottom line: We have limited social insurance in this country to help defray costs for long term care. So, what if your spouse gets sick? Or you do? Or you need to take care of your elderly parents?
Basic options include the following:
- Medicare, which is limited (after 100 days you have no coverage) unless you qualify for Medicaid and that’s for those with very limited or no assets.
- For the middle class, there is no long term care social insurance available.
Once you’re in this, you’ll find there are a host of definitions and policies. Here’s a brief rundown.
Long Term Care is defined as: Coverage for nursing care in a nursing home or home care nursing care. Policies have varying definitions. If you need a caregiver (making meals), some policies cover those.
What is a disability under Long Term Care policy? You are disabled and entitled to coverage if you can’t do two activities of daily living such as bathe or wash yourself, dress yourself, feed yourself, have continence issue, or can’t go from bed to chair.
You can design your own policy: You can pick how much money you want per day. In the NY metro area a nursing home is $100,000 per year; home care can range from $80 to $120 per day.
How much money will I be receiving and for how long? You can get coverage for an unlimited amount of time or a few years. You can use this policy if you have an accident, or if you need home care — it’s not always just for old age.
If you have a five-year policy paying out $7,500 monthly that’s a $450,000 policy, and you receive benefits until that amount is used up. If you had an unlimited policy you’d be covered for the rest of your life.
Cost of Policies — It depends:
Ted suggests adding an inflation rider (there’s an added cost for this that you need to ask about); the costs of nursing homes have gone up significantly through the years so this can cover you against higher costs.
Elimination Period: The period of time that you’re disabled before you start receiving a benefit from the insurance carrier. You are paying money out of your own pocket for this period of time – you have to prove you are receiving care for this period of time (not just having your husband or family member helping out); the longer the waiting period the lower the premium. So you can have a 30 -90 – 360 day waiting period.
Ted suggests this type of plan: You can have a 90 day waiting period for nursing home but home care can kick in right away.
Since there are so many variables in designing a policy to fit individual needs benefits can be customized to fit each individual’s pocketbook. Ted’s biggest piece of advice? To look at three companies to make sure you are getting the most competitive quote with similar policy features.
There are too many decisions to make, so frankly, we often don’t want to deal with it. So you need a really good broker who will spend the time explaining all the nuances and options.
RED FLAGS: Be sure to ask your broker about these:
1. What if one year you miss a payment on your policy?
Ask about non-forfeiture benefits – there is a way to protect you.
2. The companies don’t guarantee the premium they guarantee the benefit and it is possible your premium can go up so how do you protect against that?
3. There are two kinds of policies to ask about:
* You have to submit your bills monthly to get reimbursed. So, if at the end of January you have $7,000 of bills, you will be reimbursed only after you’ve submitted the bills.
*Or, there is an indemnity policy that pays cash and you don’t have to submit bills (but it’s costly).
4. Caregiver and Adult Daycare— The caregivers have to be approved by the insurance carrier. So they can’t be family members unless they are a licensed nurse. There is a possibility that your favorite cleaning lady can help out but she may have to be trained. Ask about training.5. Look at the financials of the insurance carrier that you are purchasing from because if they go out of business you could lose. More often than not, these companies get bought out by others and your policy gets transferred.
6. Does LT Care Insurance provide if you are in an assisted care facility? Only if you are a resident inpatient – be sure to ask about this.
7. Is it better to buy it now or wait? It’s cheaper to buy it the younger you are. Baby boomers turning 60 are the biggest market.