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How to choose the
right policy
By Jeffrey Steele
From
LA Times, September 21, 2004
Because long-term care insurance plans tend to be complex, it’s not
always easy to compare them. But there are a number of features to
examine.
First, seek plans that offer the flexibility to receive care in a
nursing facility, an assisted living center or at home, said Julia
Alexis, director of marketing and business development with Washington,
D.C.-based AARP Services Inc., which markets AARP’s long-term care
insurance plans.
“There are some who bought nursing home plans years ago [and] can’t
really use the coverage, because it’s just nursing home coverage and
they want to be at home,” she said.
Some
long-term insurance plans offer preferred health discounts, providing
lower premiums to those in excellent health with no risk factors. Others
offer spousal discounts, said Bob O’Toole, president of Informed Elder
Care Decisions Inc.
“By
comparing three companies, you’d be surprised by how significant the
differences in cost could be,” he added. “They might be as much as 30%
apart.”
Some
other areas to compare:
•
Plan benefits: Study the plan benefits, including the daily benefit and
the benefit period. Daily benefit refers to how much the coverage will
be on a day-to-day basis. Benefits of $100, $150 and $200 a day are
common.
Benefit period refers to how long the benefit will be in effect. Typical
choices are two years, five years and unlimited or lifetime benefits.
AARP
reports that the average individual’s stay in a nursing home is 2.4
years, but many people receive care in the home prior to moving to a
nursing home. For that reason, AARP recommends purchasers buy no less
than three years’ coverage.
•
Elimination period: Elimination period refers to the waiting period
before your policy’s benefits kick in. Elimination periods of 30, 60 or
90 days are common, and during these periods the costs are borne by the
policy holder. The shorter the waiting period, the more policies cost,
according to Hodges. But if you choose a longer elimination period, be
sure you’ll have funds to cover the cost of care for the 60- or 90-day
period.
• Inflation protection: In this era of escalating health
care costs, one crucial benefit feature is inflation protection, said
Geoff Gordon, San Diego-based western regional director with
Deerfield, Ill.-based MAGA Ltd, an insurance brokerage that
handles only long-term care insurance.
With inflation protection, premiums are higher, but
benefits increase annually by a specified amount. Inflation protection
can be either simple or compound. With simple inflation protection of
5%, for instance, a $100-a-day benefit would be increased by $5 each
year. With compound inflation protection, the same benefit would be
hiked by $5 the first year, with the next year’s 5% gain coming off the
new daily benefit of $105 rather than $100, according to Gordon.
• Home care percentage: Another benefit feature to
consider is the percentage you can designate to home care. For instance,
if you have a $200 daily benefit in a nursing facility, you can
designate a percentage, such as 75% or $150, to go toward care in your
home, Gordon said.
•
Nonforfeiture riders: Another consideration is your ability to continue
paying for long-term care insurance. year after year. For those fearful
they may not have funds to continue paying, insurance companies offer
nonforfeiture riders.
With a nonforfeiture rider, the premium is raised for a set number of
years. If you cannot continue paying after those years, you will receive
a paid-up policy with reduced benefits, or you will get a refund of a
portion of the money you have paid, O’Toole said.
“
My advice is if there’s even a remote chance you might drop the
insurance because you can’t afford it, you should probably look at other
choices than long-term care insurance, because the nonforfeiture rider
will cost you considerably more — 30% to 35% more,” he said.
•
Provider’s customer service: In addition to considering benefits and
premium price, also check out the insurance provider’s customer service,
said Amy Silverstein, AARP Services senior product analyst.
For
instance, under the AARP plan, a nurse-care advisor is assigned to each
policyholder who goes into claim or benefit status, she said.
“The nurse care
advisor will work with the doctor and the family member to set up care —
whether it’s finding the right nursing home in [the senior’s] area or
finding the right home health care worker,” she said.
