Long term care insurance is not a generic product. Insurers have various offerings when it comes to this risk management tool. To get the policy that’s most suited for you, here are three things that you need to keep in mind as you shop around for long term care insurance:
1. Agents and Insurers
When it comes to acquiring long term care insurance, you need to carefully select who you’re going to work with and to which institution you will entrust your premiums. Though they are not policy features per se, it’s important that you evaluate every agent and insurer you come across with.
Work with an agent who prioritizes your interests over their own commission. A good agent works hard to meet your needs and assesses your financial plan to determine the extent of coverage that’s suitable for you.
Also, you need to make sure that you buy from a company that’s financially strong and who will still be in business by the time you make a claim. You can check a company’s ratings and performance when it comes to making claims through independent organizations such as AM Best, Standard and Poor’s, Fitch, and Moody’s Investor’s Service.
Be wary of policies that only cover medically necessary care. The smart move would be to purchase a policy that will pay benefits both for custodial care and cognitive impairment. With this kind of policy, you can receive benefits whether out of the need for assistance in performing basic daily tasks or due to a cognitive condition like Alzheimer’s.
As you shop around, it’s important that you examine the different areas of your policy, such as:
It’s advisable that you purchase a policy that will pay for a wide range of care settings. This will give you more options in the future. Furthermore, you need to clearly understand how the policy will pay for each type of service or facility.
A monthly benefit feature can also be a good choice if you want full control of how you will spend your benefits. With this kind of coverage, you will be given a monthly amount that you can spend for different care expenses. It is less restrictive and allows you to spend your benefits in the way that suits you best.
It’s important to know the limits of the policy before you purchase it. Check the clauses for restrictions. For instance, if a policy has a pre-existing conditions clause, this may narrow down your benefits if your care needs are a result of an illness or disability that you developed before you purchased the policy. This may mean a longer waiting period before benefits are paid, lower benefit amount, or no coverage at all.
Take note of the following features as you compare policies:
- Inflation protection – This is one feature that you shouldn’t forego, especially if you’re buying before you turn 75 years old. Inflation protection is very important because it keeps your benefits at pace with rate increases in long term care services and facilities. Since benefits are usually tapped 10 to 20 years after the policy’s acquisition, it’s important to ensure that your cost of care will not outweigh your benefits. If your benefits fall short of your expenses, you will need to pay the difference from your own pocket.
- Duration – A lifetime policy seems appealing at first. However, this type of policy is more expensive than a policy that has a determined period of time. The duration of your policy should be based on your possible needs, financial capability, and threshold for risk. Consider that the chances of needing long term care for five years and beyond are relatively slim. Since that is the case, you can go for a policy that will last for two to three years.
- Upgrades – Insurance is an evolving field and it’s possible that a new type of product will emerge in the future. When this happens, determine if your insurer will offer upgrades when new policies emerge.
Since long term care insurance is customizable to your preferences, it is a personal decision. Here are tips that can help you as you start plan for the future and acquire this policy:
- Have a clear understanding of your needs and how much of your assets you want to protect. When you’re clear in these aspects, you will be more likely to sign up for a policy that’s best suited for you.
- Start early. Planning ahead for long term care allows you to study all of your options and prepare more thoroughly. When you wait for a crisis to happen, you’ll tend to make decisions in haste that may not be suitable for your situation.
- Study the policy from cover to cover. Make sure that you understand what you’re buying. If the insurance language is hard for you to understand, work with a professional and let him or her explain the policy in a language that you can easily comprehend. Doing your own research can also help.