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The last thing you need from
an insurance company is a packet of confusing brochures and tables.
The best companies know that sending you more “stuff”
will just add to your trash can without helping you figure out
the intricacies of LTCi. It isn't as difficult as it seems, but
understanding a company's language and procedures is crucial
to getting the policy that fits your needs. To help simplify
this language I have compiled–in plain english–many
of the basic definitions of the features and optional riders
of a LTCi policy.
LTCi basics
Long term care insurance, an insurance program that pays the
bill when you need extended care in your home, assisted living
facility or nursing home, consists of basic coverage and features
plus riders. The basic coverage is the maximum dollar amount
per day times the number of days of coverage for which your company
will pay for care. It includes an elimination period–which
is simply the number of days that you will have to pay for care.
Basic coverage should include nursing home and assisted living
along with an option of receiving care in your own home. |
LTC Insurance: Compare the top companies, and
get the best quote for your needs.
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LTCi features
Features are benefits that are included with your basic coverage.
A feature–with the exception of home care–neither adds
to your cost nor takes anything out of your "pot of money."
The following benefits should be included in your policy as features,
not riders. You might pay a few dollars more, but it will be
worth the cost when you need care.
Home health care at 50% or 100%.
HHC is the only feature that should add cost to your policy.
- Help with activities of daily
living, various therapies, skilled nursing, assistance from home
health aid or medical social worker
- Domestic services
- Waiver of premium/spouse discount
- Restoration of benefits
- Adult day care
- Prescription drugs of type given
in nursing home or hospital
- Rental of hospital equipment
- Care giver training
- Respite
- Hospice/ambulance
- Patient Care Coordinator
- Home modifications
- Bed reservation
- LTCi Riders
A rider is an extra benefit that
will increase the premium on your policy, often substantially.
A certified agent can be indispensable as he/she will help assess
your situation to determine which, if any, riders you need.
Don't refuse LTCi insurance just
because you can't afford the riders. If the initial price seems
too high, ask the agent what riders he has included, as agents
often include inflation riders without asking. Also, be aware
that companies that appear to have lower premiums may simply
be listing several of the features as riders. If so, by the time
you include those benefits, you will be paying as much as you
would to a company that simply includes them as features.
Waiver of premium for spouse
Nearly all legitimate companies waive the premium for the person
who goes on claim. However, only the best waive the premium for
both when one person needs care. Others add the second waiver
as a rider.
Inflation rider
All companies will urge you to include an inflation rider with
your policy. This rider will increase your daily maximum as well
as your total pot of money by 3%, 4%, 5% compounded, or by 5
percent simple each year. On a 5% compounded, if you start with
a $100 per day benefit, you will have $200 per day in 15 years
without increasing your premium each year.
Since nursing home costs increase
faster than inflation, it's a good idea to take some sort of
inflation rider if you can afford it. It does nearly double the
cost of the policy. An alternative is to start with a higher
daily benefit in the first place; for example, starting with
$200 a day will be much less than $100 a day with an inflation
rider. The draw back is that your ceiling is then $200 a day.
If your health is still good,
you will have the option of adding the inflation rider at a later
date. Keep in mind, however, that the price of it will be based
on your attained age. Your agent can do the math to help you
determine which approach will save the most money. LTCi without
the inflation rider is better than not having LTCi at all.
Optional Increase
Even if you cannot afford an inflation rider, some companies
will offer as much as a 15% increase in your benefit every three
years. This will increase your premium at the time you add the
increase, and you will not receive the offer again once you have
turned it down. The increase will be based on your attained age
but will not require medical underwriting.
Return of Premium
Return of premium gives your money back after a certain number
of years if you have never needed care. If you do not claim it
yourself, the premium goes to your beneficiary. However, this
rider increases your premium substantially – as much as
double or triple the basic premium. Furthermore, neither you
nor your beneficiary will receive the entire premium in one lump
sum. It is given back over time at approximately the same rate
at which you paid it. Most people do not purchase the ROP rider.
Shared benefit
The shared benefit rider is only for a married couple. With some
companies, it simply allows a spouse who has spent all the money
in his policy to draw out of his wife's policy, providing she
is not on care herself. With others, the rider purchases a third
pot of money, equal to the pot of one spouse, that either spouse
can draw from when his or her own pot is exhausted. The spouses
must have equal benefits to get this rider, and the extra pot
does not receive the "restoration of benefit" if the
user goes off claim. An inflation protection option will usually
apply to the shared benefit amount, however.
Paid-up Survivor benefit
The survivor benefit is one of the best riders a married couple
could choose and is very inexpensive, adding as little as $5
or $10 to the basic premium. If husband and wife are on the same
policy, and have owned it for at least 10 years, the remaining
spouse will receive a life time waiver of premium–with no
reduction in benefits–when the first spouse dies. This waiver
is priceless to the living spouse, but not all companies offer
it.
Non-forfeiture rider
The non-forfeiture rider provides you with a reduced benefit
if you should ever become unable to pay your premium and be forced
to drop your coverage. Generally, if you have owned your policy
for a certain number of years–depending on the company–what
you have already paid will be applied toward a paid up policy
of up to three years. This prevents you from losing several years
of premium and is a relatively inexpensive rider.
Survivor maximum benefit increase
Upon one spouse's death, a company will increase the surviving
spouse's maximum benefit by one half the deceased's maximum benefit
at the time of his or her death. This one is usually less expensive
than an inflation rider or a shared benefit rider, but more than
a paid-up survivor benefit.
Don't assume that any rider can
be added to your policy later. Any company will require proof
of insurability unless you have a clause that says otherwise;
for example, the guaranteed purchase option does not require
medical underwriting. The inflation rider can be added later,
with proof of insurability, with some companies. If you choose
to try to sort out various company brochures on your own prior
to sitting down with an agent, be sure to write down a list of
questions. There is a lot to know about LTCi; understanding what
you are getting in the beginning will save you both dollars and
frustration later.
about the author:
In 2001 Gary Stuart took advantage of modern technology by developing
a web site to give his customers an opportunity to explore their
insurance options and learn how to make sure their purchase would
meet their needs for many years to come. His method of presenting
insurance has changed to keep pace with the 21st century, but
his emphasis on education first remains unchanged. Click here
for more information http://www.affordablelifeinsurance.com. |
