Tuesday, July 7, 2009

Long Term Care (LTC) Insurance

We've been talking about finances and in my last post, I shared some cost estimates for providing care. It's a hefty price tag no matter how you look at it--you and your parent will pay this in money, emotional stress and/or personal effort, no doubt in all three. I'd like to share some options for the money side. One of the most important financial aids to consider is Long Term Care Insurance.

In the 1980's, the company for which I was working offered LTC policies to me as an employee, to my spouse and to my parents or in-laws at a reasonable group rate. I found out that any policy would remain in force at the same premiums if I left the company. I immediately signed up and arranged for a policy for my father-in-law. Three years ago, as Dad's health declined, the family made plans to care for him at home and later in an assisted living facility. Three years ago, that 25-year-old policy kicked in a chunk of change to help pay for Dad's expenses and supplemented his income to allow for him to live in comfort with good care. It was one of the best investment decisions my husband and I ever made.

Care Tip: Talk to your parent about purchasing a policy, certainly, but consider a policy for yourself, especially if you're over 50. The earlier you purchase, the lower the premiums will be and the lower the overall cost.

Let's talk about the basics of LTC coverage. I'm using "you" to mean you and/or your parent; I'm assuming you're considering your own policy.

What Might an LTC Policy Cover?
An LTC insurance policy is designed to cover a variety of care options that you may need if you are chronically ill or have become mentally incapacitated and need continuous care over an extended period of time. A basic policy will pay:
• A daily sum to cover the cost of a nursing home stay.
• A daily sum to cover the costs of supportive services provided in your home, such as 24-hour nursing care, a health aide, meal service, or housecleaning.
• A daily sum to cover the expenses of living in an assisted living community.

Activities of Daily Living (ADL)
Most LTC policies judge a person’s physical competence in terms of how many Activities of Daily Living the person can perform on his own. These activities include such things as bathing, dressing, preparing and eating a meal, and taking medication. Each policy will state what it considers to be “full function”. If a person cannot perform 3 or 4 of the ADLs described (depending on the policy), then the person may begin to claim benefits from the policy. Usually a doctor’s statement is needed to verify eligibility.

Make sure that the policy clearly states when and under what conditions benefits are triggered. Make sure that you understand how the policy is defining each ADL and share that information with your doctor who will be writing the report to send to the insurance company.

Some Benefits of an LTC Policy
When looking for a policy, pay attention to the following:
• The daily benefit for the nursing home. Most insurance companies will give you a choice of the benefit you want from as low as $60.00/day to $200.00/day. Each increased amount also increases the premium cost of the insurance. To choose a benefit level, visit or call several nursing homes in the local area to determine the average price. Even choosing the lowest benefit translates into money you or your parent will not have to pay from current income sources.
• The daily benefit for in-home care and what is covered. The in-home care is usually stated as a percentage of the nursing home benefit. Again check some local sources such as the Volunteer Nursing Association to estimate local costs for such services.
• The assisted living benefit. Some policies include a benefit if the person lives in an assisted-living facility as a result of a decrease in the number of ADLs the person can perform.
• The criteria for invoking the policy. In how many of the ADLs must the person be deficient and what documentation is necessary to gain benefits?
• When do benefits begin? Many policies specify that benefit payments begin 90 days after the patient has met the criteria (qualified) for benefits. Until that time, you are still responsible for paying the premiums.
• Increasing benefit provision. What provision is made to increase the daily benefit (from $60/day to $90/day, for instance)? Most policies allow you to increase with a medical affidavit and an increase in the premium, but some companies only allow changes to the policy once per year during an “open enrollment” period.
• Cost-of-Living increase. Costs are sure to rise and some policies provide an automatic adjustment of the daily benefit based on the current cost-of-living indexes. Some companies charge an extra premium for this adjustment.
• The lifetime limits for the policy. The higher the limit, the better, but higher limits mean higher premiums also.

So, the best LTC policy can provide benefits for home care, assisted living communities and nursing home care. In my next post, I'll share some other things that you need to consider when looking for a policy and a way to decide how cost-effective a policy might be for you and your family.

Until then, blessings on your caregiving day!

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