From Jacking Premiums to Amazing Grace Periods - An Irreverent Look at Long-Term Care Insurance
By: Steve Dahl | Posted: 03rd March 2008
"If I would have known I was going to live this long I would have taken better care of myself!" That funny line isn't so funny when you're facing a health crisis without the funds to deal with it. Health care costs go up as we age but fortunately we now have some financial tools to help. Now we can make those golden years more comfortable; both physically and financially. Here's one vehicle... Long-term care insurance (LTCI). But don't hop on this insurance product until you really understand what you're getting into. Like any insurance policy, we learn how well it works when we really need it. Here are some of the fine-print considerations to examine if you are looking at any form of long-term care insurance (LTCI).
Long-term care is often considered an issue exclusively for elders. Not so. Anyone who needs ongoing care because they cannot independently perform the basic daily living activities such as dressing, bathing, or eating due to an injury, illness or even cognitive disorders may be a candidate for long-term care. Affording long-term care is something that concerns many of us and one way to deal with the unpredictable long-term care costs may be long-term care insurance (LTCI).
Hopefully you'll live a long and prosperous life and health or money issues won't cloud your golden years. But, if you want to be prepared, consider how to make long-term care insurance work to your advantage. Don't count on Medicaid. It does cover a bit of your long-term care expenses but you've got to be dang near death or flat broke or a combination of the two to qualify. Then there's your friendly neighborhood HMOs, Medicare, and Medigap but guess what. Right. They don't help much either.
Here are three things you can do to get over your anxiety about this whole not-so-fun question of "How long will I live and can I afford it if I do?"
1. Eat your dang vegetables! Your mother was right. They are good for you and they keep you healthy. In other words, clean up your lifestyle a bit and add a few more healthy years to your life.
2. Make a ton of money. Yeah, yeah, yeah, your mother told you to start saving early. If you did so and you've got some financial plans in place, good for you. If not, it's never too late to start with some basic planning and investing.
3. Buy some long-term care insurance. We all hate paying those premiums but the right kind of long-term care insurance can be a lifesaver when the going gets tough.
Eat your veggies, fill up the piggy bank, and buy yourself a long-term care insurance policy. The first two are relatively easy; the last one has a few complexities to be aware of. Get with an agent you trust. Get a referral from someone in the legal or financial fields. Here is some of the even finer print to watch for when it gets down to the nitty gritty of policy comparison:
1. Elimination Complication... Or, in the insurance industry words, Elimination Period: This is that period of time prior to your insurance policy paying out any kind of benefit. They typical options range from 20 to 100 days. This is also referred to as a waiting period. Make sure and ask your agent to clarify what your elimination period is and have him explain the cost/benefit considerations of making it longer or shorter.
2. Time Crunch... Or, as the insurance industry puts it, Duration of Benefits: The ceiling or limits placed on the benefits a policy holder will receive. This may be limits such as a set amount of money or a time limit of two years, etc. Again, compare these benefits to your other financial resources.
3. Daily Bread... Or, as the insurance industry feeds it to you: Daily Benefit: This is the actual amount of daily coverage you will select as your benefit. This typically ranges from $50 to $350 per day. Also keep in mind the cost of living in your neighborhood. Health care in a small town in Wisconsin may be less costly than downtown San Diego. Your agent should be able to give you some guidance on this.
4. Easy Rider... Or as our insurance friends call it, Optional Inflation Rider: The term used to describe the method of protection against inflation.
5. Done-Got-That-Bug Before Or, affectionately known as Pre-existing Conditions and we-aint-gonna-cover-your-tail-for-that-one-for-a-while rule. The insurance provider will require a waiting period (in some cases 6 or months or more) before full coverage goes into effect on treatment for pre-existing conditions. This varies from carrier to carrier.
6. Home on the Range... Or, our insurance folks refer to this as Range of Care: In other words, coverage may vary for different levels of care. Some care may be at a skilled level, intermediate level, or a custodial level. The facility itself has a range of care definition that your agent will explain. The nursing home, assisted living facility, and/or at home care are all levels of care that come with a different price tag. Ask for clarification on this.
7. Jacking Premiums... Or, also known as Premium Increases: Your long-term care insurance policy will have terms that explain, if, how, and when those monthly premiums will go up. Reality check here. There is rarely an "if" but almost certainly a "when." Of course your costs will go up, just make sure you know how much and if you have any options when they do. Can you change the coverage you have if premiums go up or are you locked in? Ask your agent.
8. To Know me is to Renew me... Or more commonly referred to as: Guaranteed Renewability: This is a policy agreement in long-term care insurance policies that allows you to renew it and maintain coverage even though you may have had changes in your health.
9. Amazing Grace Period... Or in less poetic terms, Grace Period for Late Payment: If you slip up and you're a little late on your payment, this is how much time the company will allow before they do something nasty like cancel your policy. It is highly advised that you don't test just how graceful your insurance carrier can be. They may not always have the same warped sense of humor that certain article writers do.
10. No Debate Rebate... This is a fun one for a change, Return of Premium: This is the little clause that says you may get some of your money back if you haven't used your policy for a certain number of years. Please notice, we did say... "May get some of your money back."
11. Bed Pan Ally... Better known as Prior Hospitalization: This is the clause that indicates whether or not you must stay in a hospital before you qualify for long-term care insurance benefits.
There's obviously a lot to know with this insurance game so do your homework long before you need it. Please oh please make sure and check with your attorney, accountant, financial planner or other professional on this important but complicated topic. Not everyone needs or qualifies for long-term care insurance so ask a lot of questions and don't forget to eat your dang vegetables!
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Tags: elders, insurance policy, insurance product, medicaid, money issues, combination of the two, prosperous life, financial tools, health care costs, long term care, health crisis, term care insurance, long term care insurance, care expenses