Tuesday, July 14, 2009

LTC Insurance: Tips & Suggestions

Long-term care (LTC) insurance can be a good investment and is worth serious consideration. Over that last few posts, we've been discussing the financial and coverage issues surrounding the decision you make for your parent and for you. Today, let's take a look at some other, general, things to consider. I use "you" here to refer to you personally or your parent.

In addition to details about the payout benefits, check that the LTC policy you are reviewing covers the following:

• How will this policy interact with others, such as Medicare, Medicaid or retirement policies? You may need to use other policies first before this one can be used.
• "Take-it-with-you." If you are purchasing the policy through your employer, can you take the policy with you and is there an increase in premiums for doing so? Premiums do not always increase when you leave your company.
• Out-of-state or out-of-country coverage. If you travel a great deal or spend part of the year in a second residence, this coverage might be of interest.
• Suspension of premiums while receiving benefits. While you are receiving benefits from the policy, you should not be paying premiums. What documentation is needed to inform the insurance company of a change in status?
• Reserved LTC comunity bed during a hospital stay. During an assisted living residence or a nursing home stay, there may be times when you need to be admitted to the hospital for treatment. Make sure that the LTC policy reserves the bed in your residence community or nursing home until your return.
• For insurance premiums and benefits to be tax deductible, the policy needs to be "qualified" under the Health Insurance Portability and Accountability Act (HIPAA) of 1996.

As I've mentioned before, saving for long-term care should have as much priority in your financial planning as does saving for your child's education or for your retirement. Given its importance, here are a few final suggestions for planning.

• Consider an LTC policy when you or your parent is young. Age 40 is not too young, and you will be able to purchase a higher daily benefit for a much lower price. The high-end premiums quoted in the example above are for a policy purchased at age 50, but would be higher at an older age.
• Buy an LTC policy when you or your parent is healthy. A fairly clean medical exam permits you to buy a higher daily benefit at a lower rate. Even if you decide to increase the daily benefit later (and the premium), most companies leave the basic premium where it is and base the premium increase only on the increased part of the daily benefit.
• If you wait too long in terms of age or health, insurance companies will refuse to cover you or the rate will be prohibitive.
• Buy a policy even if it covers only half the cost. You and your family may be able to fund the rest of the cost from savings or investments.
• If you have an LTC policy in place, do not cancel it when you or your parent becomes eligible for Medicare/Medicaid. Each state has varying rules for qualifying for Medicare/Medicaid assistance, so have an eldercare attorney review the policy and then decide.
• Before purchasing a policy, get an opinion on its value from an objective source, one not interested in selling you insurance. An eldercare attorney, a financial planner or a knowledgable friend are all good choices. Some states also have an insurance counseling program from which you can request an objective opinion.

To Read More:
Abromovitz, Les. Long-Term Care Insurance Made Simple. Practice Management Information Corporation, November 1999.

Lipson, Ben. JK Lasser’s Choosing the Right Long-Term Care Insurance, Wiley, 2002.

Rowley, Stephen F. The Consumer’s Guide to Long-Term Care Insurance. 1st Books Library, 2004.

For easy purchase, go to the Amazon.com Parentcare 101 Bookstore.

Blessings on your caregiving day!

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