As the cost of health continues to increase, more and more people are looking for ways to meet those inevitable expenses. And as people age, the prospect of needing long-term care at home or in an institution, becomes more and more of a reality. Some startling statistics illustrate the need:
- According to a study done by the Department of Health and Human Services, at least 70% of people over age 65 will require some long-term care services at some point in their lives.
- Annually, over 250,000 hospitalized for hip fractures
- Half of Americans 55-64 have high blood pressure and 25% are living with diabetes
- 14.9 million people care for someone who has some sort of dementia
Long-term care insurance has become more and more popular as a tool to meet the costs of care. Unfortunately, there is little definitive information available to assist people in deciding if an insurance policy for long-term care is a wise investment. This checklist will be useful for addressing some questions about long-term care policies.
- Services Covered: You have the option to contract for nursing care or care at home or both.
- Per Day Limits: Policies specify a limit on the amount of care they pay for per day. Others are written to cover a flat amount over the life of the policy.
- How Long Will the Benefits Last: You can request a fixed period of time for the policy will be in force. The industry standard is from 36 to 60 months.
- Maximum Lifetime Benefit: Many policies will have a “cap” that limits the amount of benefits they will cover. That amount could be $50,000, or $100,000 or more depending on how much coverage you want to purchase.
- Length of Coverage for Periods of Confinement: For policies covering nursing home care, a limit for length of time covered is usually written into the contract.
- Wait Before Benefits Begin: This is called the “elimination period” and specifies how much time must elapse (30, 60, or 90 days) between when the need for care is established and when coverage of care starts.
- Guaranteed Renewable Clause: Policies will stay in force as long as premiums are paid on time even if new health issues arise.
- Waiver of Premium Provision: Policies are designed so that during the period of time that you are “under policy”, that is, receiving paid benefits, you do not need to pay your premiums.
- Inflation Adjustment Feature: As the cost of care goes up from year to year, the cost of premiums will rise as well. Policies will typically specify that a fixed adjustment for inflation will be applied to the amount of the premium. Historically, that amount is 5% per year.
- A.M. Best Rating: It is critical to do business with a company that is going to be around long enough to keep its commitment to covering your long term care costs. A.M. Best has a rating system that monitors the health of companies.
- U.S. Department of Health and Human Services, National Clearinghouse for Long-Term Care Information, April 2014.
- National Hospital Discharge Survey, National Center for Health Statistics, August 29, 2013.
- Older Baby Boomers Sicker, Using More Care than Earlier Generations, Health Affairs, 2015.
The National Alliance for Caregiving and AARP, Caregiving in the U.S. 2012.