Is Long-Term Care Insurance Right for You?
Approximately two-thirds of all Americans who reach the age of 65 will require long-term care at some point in their lives, whether it be in their own homes or in a nursing home or assisted-living facility. The cost of this care is considerable -- more than
Long-term care is not covered by conventional health insurance or by
This type of insurance makes the most sense for upper-middle-class married couples; others may find it unaffordable. For families with low incomes and low assets,
Some employers offer their employees LTC insurance group rates, but very few pay anything toward premiums. However, premiums are likely to cost less than in individual policies. Those who buy employer policies are able to maintain them even after changing jobs or retiring.
The federal government offers LTC coverage through the Federal Long-Term Care Insurance Program to all federal and
Two basic types of LTC insurance policies that are available, "indemnity" and "reimbursement." Indemnity policies pay a flat rate regardless of the cost. Once you qualify for benefits, no proof of expenses is required. "Reimbursement" policies pay a percentage of actual cost up to a daily maximum. Reimbursement plans are generally less expensive but require more paperwork.
To determine how much coverage you require, estimate what you can afford to pay for long-term care by analyzing your expected income from all sources. Compute the difference between the cost of nursing care in your area and the expected income that you can allocate for it. For example, if you can afford
Another important consideration is a policy's "elimination" or "waiting" period, the length of time you must pay for covered services before the insurance activates. Naturally, the longer the period you choose, the lower the premium.
Discuss these important issues with your agent. Once you buy a policy, you have 30 days to review it and receive a full refund if you change your mind. Make sure the terms are accurate. Depend neither on a preliminary sales document nor the presentation. All issues will be covered in your contract. Here are some considerations to weigh before signing a contract:
1. Determine the circumstances under which the policy will pay you benefits.
2. Review any restrictions about facilities you can use.
3. Determine whether there are home-care options. (This option is more expensive, and you may not want it.)
4. Consider an "inflation option." This is expensive but worthwhile, especially for young policyholders.
5. Find out if the premiums are fixed. Make sure you understand the circumstances under which premiums may be increased. (In many states, insurance companies can raise premium rates with the approval of the state department of insurance. Find out whether premiums have been increased in your state.)
6. Make sure there is a "waiver of premium" when you start collecting benefits.
7. Understand any and all stipulations about pre-existing conditions. For group policies, there may be a six-month waiting period.
Long-term care is a very important issue, and potentially very expensive for you and your family members without adequate insurance. Whether you choose to buy insurance or not, it merits careful consideration.
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Personal Finance - Is Long-Term Care Insurance Right for You?
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