1. Figure out what will be covered.
LTCI policies vary and may cover home health care, homecare, adult day care (and health care), assisted living, skilled nursing care, hospice care or some combination of these—look closely and see what is covered. Your best bet is to get a policy which covers most, if not all, of these possibilities.
2. How benefits will be paid out.
Most policies pay by a daily benefit. Sometimes the daily benefit is calculated using a monthly average. This is advantageous when working with homecare; nurses or aides might work sporadic hours if, for example, a family caregiver is available. Secondly, benefits are paid on either an indemnity or reimbursement plan. So benefits are either a lump sum payment regardless of what the charge is OR (in the case of reimbursement) the insurance carrier will only pay the actual charges for care even if the charge is lower than the maximum daily. Sometimes the unused funds are carried over.
3. When your coverage will begin.
Many policies spell out how many activities of daily living (like dressing or bathing) you must need assistance with before your coverage begins. There is also a waiting period, which usually runs from 0-90 days, but sometimes is longer. So you need to consider what you can afford to cover before your benefits kick in.
4. How long will your benefits last.
How long do your benefits need to last—a few years? 10 years? Although this is somewhat of an unknown, you need to take into account if you are predisposed to a chronic illness and what kind of funds you have at your disposal.
5. What will your benefits be “worth” once they are paid out to you.
Not only should you look at how they are paid out but what is exactly paid out in regard to inflation. Many policies offer some sort of inflation protection. Considering long-term health care costs only seem to be rising, this protection translates into having a financial cushion protecting your assets.
6. Which resources can help you make the best decision.
There are three resources you need to use to make the best decision: ratings companies, a reliable agent and yourself. Make certain you choose a company who has been in business and is highly rated by A.M. Best, Moody’s, Standard & Poor’s, or Weiss.
Finding an agent is tricky. Many people are “referred” by carriers or internet searches. This is akin to mushroom-picking by memory—it is not in your best interest. Look for an agent that sells a variety of products, but specializes in LTCI. Also, if the agent’s commission rates are standardized, then it is not financially gainful for him or her to up-sell you.And although most of these decisions can and should be aided by professionals, it is your job to be vigilant. Use common sense along with the help of professionals. It can be difficult to determine what your long-term care needs are. A good place to start is by looking at what many consider the baseline—that is, what the federal government offers to its employees via the Federal Long-Term Care Insurance Program.
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