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Does Long-Term Care Insurance Cover Costs Forever?
Long-term care insurance provides coverage for limited times. It is unlikely the benefit will cover costs “forever”. Therefore, you can manage the costs of your long-term care insurance by choosing plans with longer or shorter periods of coverage, as well as by choosing the length of time you will be dependent for before the benefits kick in. We discuss this more in the 10 tips and questions to ask about long-term care below.
10 Tips for Buying Good Long-Term Care Insurance: Your LTC Buyers Checklist
Since each insurance company works with their own underwriting standards, it is helpful to have a checklist of items to ask about so you understand what you are shopping for and buying in the coverage.
Here are some points that are important to consider when you are looking for the best company to cover you for LTC:
Ask them about the Activities of Daily Living requirements in order for you to receive a payout of benefits, you want to understand what qualifies for coverage under the LTC plan you are considering.Does it cover cognitive impairment, some peoplOptionse may have cognitive impairment, yet still be able to perform ADL. Will the plan you are looking at payout in these cases?Find out what is on the list of Activities of Daily Living that qualify for each plan you are comparing. For example, maybe there is a function of daily living that you can not perform, but by the terms of the policy you chose, it isn’t considered one of the qualifying ADL. A company will usually require more than one activity of daily living to be an issue before you can qualify for your benefits. You want to know what qualifies in advance before you buy your policy. There is no standard definition across the industry for how ADL are evaluated, so it is important to ask questions and get examples o situations for the coverage you are buying. Some examples of ADL are: bathing, dressing, moving around (transferring), eating. How each is defined can make a difference.Ask them if there is a cash value or option to cash out should you not use the coverage and if the policy pays dividends. What happens if you die and haven’t used the coverage?Compare cost of single coverage vs. shared coverage with a spouse. This is a good way to save money. In these circumstances ask for a full explanation of what happens and how this shared benefit works if you both are requiring care, vs. only one of you.Do premiums increase over time or remain constant? Is there inflation protection? Inflation will affect rates of long-term care you may have options in the plan you purchase that addresses this.How will payment work in a claim? What is the claims process? Are there monthly or daily amounts? What are the limits?What is the maximum benefit pool? What is the maximum amount of time the benefits are payable for? On average, an LTC policy may provide between one to five years of coverage. Policies do not usually have an unlimited amount of time. This is an important factor to consider when comparing policies. Then, you will want to know if there are riders available to extend that time. These details can make a big difference in your choices and when comparing cost.Is there a waiting period? How long is it?If you take a policy with a longer term waiting period, do you have other benefits that you qualify for that can cover you during the waiting period, like Medicare or other private health plans?
When Should You Buy Long-Term Care Insurance?
People often wait until they think they need something before they start planning for it, and unfortunately, in the case of Long-Term Care Insurance, this will not work in your favor. The AALTCI recommends the ideal age to look into long-term health care insurance to be between the ages of 52-64.
In fact, according to data from the American Association for Long-Term Care Insurance, the rate of rejection for long-term care insurance seems to increase with age. So you may even want to look into options sooner. The increasing rate of rejection as you age makes a lot of sense given that insurance is based on an expected risk, and as you get older more medical restrictions and situations may come up which would point to an increased risk leading to a greater need for long-term care.
Who Should Buy Long-Term Care Insurance to Cover Costs?
Obviously, if you are worried about your future you should consider buying long-term care insurance either for yourself, or a parent. However, you should also consider:
Making sure you have good health insurance in the first place. Preventative medicine and taking steps to take care of your health may help identify problems before they become serious in many cases. Checking if you have other potential sources of income that you could turn to in a long-term care situation. For example, do you already have a life insurance policy that you may be willing to borrow money from or if the situation came up?Are you in a position to self-insure long-term care costs? Do you have family members who will help? Are those family members really in a position to help?
The decision to purchase long-term care should be reviewed as part of your long-term financial plan. Whether you need it or not is very specific to your own situation. You may decide after reviewing with your financial planner or broker that there are complimentary choices to explore, or you may make changes to your other insurance coverages as a result that will save you money.
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