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The concept of Long-Term Care Insurance
(LTCI) is to spread the risk of LTC over all people who purchase LTC
policies, so that the typical policyholder is spared paying for the
potential devastating cost of care. The concept is similar to
auto insurance or homeowners insurance. The big difference is
that the risk of needing LTC (i.e., "having a claim") is
much greater than the risk of having a devastating auto accident, or
of losing your home in an earthquake or fire. Fortunately, the
costs of LTCI are age-related -- the younger you are when you take out
the policy, the lower your premiums, and, usually, the lower your
total cost over the years. In fact -- no matter what your age,
your costs will never be lower than they are today.
Waiting Has It's Costs
Premiums are kept lower because of underwriting. If you qualify
for the insurance, underwriting helps keep your costs low.
Unfortunately for many, underwriting also means rejection.
However, no matter what your age, your likelihood of being rejected is
greater the longer you wait to apply. If you think that LTC
insurance might be right for you, don't become an insurance company
reject by waiting too long.
Definition
A general definition of LTC Insurance might read as follows:
A policy that insures against the
loss of one's ability to function independently, whether the
inability is as a result of injury, sickness or through the natural
progression of aging, and where the inability is expected to last
over 90 days.
Please be careful to understand that
your coverage, and your ability to collect under the policy, is
determined by the terms and conditions of the specific insurance
contract that you purchase.
Choosing LTC Coverage
The key factors that you should consider when purchasing a policy
include the following:
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Type of Coverage. Is
the policy for Home and Community Based Care plus Facility Care
(Comprehensive), or for Facility Care Only?
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How much coverage. The
maximum daily nursing facility benefit and the months of coverage
will determine your lifetime maximum dollar benefit. This
lifetime maximum is your pool of money. In a
comprehensive policy you also must consider the home health care
percentage.
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Waiting period. Once
you have an insurable event (such as your need for assistance with
your activities of daily living), how long do you have to wait
before you can start drawing benefits?
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Inflation protection.
Does the policy increase in value each year, how is the value
computed, or is there no inflation protection?
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Benefits and features.
Does the policy include costs for a home medical alert benefit,
informal caregiver training, waiver of premium, and non-forfeiture
of benefits?
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Exclusions. Such as
for acts of war, free services, workers compensation, etc.)
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Access to benefits.
How many activities of daily living must you be deficient before
benefits begin? What are the definitions of those
deficiencies? How about cognitive impairment -- how is that
defined?
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Tax implications. Are
the premiums potentially tax deductible; are the benefits
potentially taxable?
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Carrier. How much
experience does the carrier have in the LTC Insurance business?
Is the carrier a leader in this business?
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Your Agent. Does your agent
have a stake in the community? Is she or he of good
character? Can she or he be trusted?
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