Long-term care insurance is basically designed to help with individual assistance in old age or in the event that a young person becomes disabled. However, like several other financial products, most people are yet to give this the consideration it perhaps warrants. Before you can buy an LTC policy, ask yourself this;
1. Will you actually need long term care?
Well, that is a bit tricky to answer with absolute certainty. However, if you were to make a decision based on current statistics, 7 out of 10 people will require long-term care once they hit 65. That is about 70% of the population. It is therefore highly probable that you will require LTC in your old age. In addition to needing care, a policy will only cover you if the care you require meets certain criteria involving the daily activities of living. If care can be provided by family members, then you probably do not require a long-term care insurance policy.
2. How much will the government pay?
Whether or not the government will pay for long term care still remains a very confusing topic. Medicare does pay up to a certain amount for limited nursing care. However, for this to work, the individual must have very limited assets ($2,000) in most states and also be on very low income. Before settling on Medicaid though, take into account that its home care programs are in most times underfunded and have many people on their never-ending waiting lists.
3. How much insurance coverage will you purchase?
Long Term Care policies are usually defined by the period over which they will pay out benefits and at times by how much they will pay out per day. LTC policies also have what is known as an elimination period. This is basically a period (often 90 days) which the insurer will not pay benefits. The costs of long term care keep on rising and have now hit more than $300 per day in some states. Make these considerations before purchasing a policy.
4. Are you allowed extra benefit carry-over?
Some LTC policies do not allow clients to carry over extra daily benefits. This means that if you purchase with daily benefits of $300 but end up in long term care that only requires $150 per day, then you lose the extra $150 per day. However, pool-of-money coverage policies give all benefits to the client regardless of what is being used. A $300 per day four-year policy will, in essence, be giving you benefits totaling to $(300*365*4).
5. Will You Require Inflation Protection?
The cost of goods and services keeps going up periodically as a result of inflation. Inflation protection increases the premiums you will pay each period throughout the accumulation phase. However, the inflation protection will ensure that you do not end up with a third of the value you had accumulated over the years due to inflation. If you accumulate $100,000 from the age of 45, it will definitely not be worth the same after 40 years when you require long term care. You should absolutely buy inflation protection.
