Financing Your Future
More long-term care insurance options
Long-term care insurance, as pointed out in last week’s column, is not for everyone but those considering it should ponder these points:
• The elimination period. This is the period (you choose the length of time) between when you apply for long-term care insurance, and when it kicks in. It corresponds roughly to the deductible on your car or homeowners insurance and typically ranges from 30 to 90 days. If you choose a 90-day elimination period, for instance, you’re agreeing to bear the full cost of longterm care for three months before the insurance takes over. The longer the elimination period, the lower your premium.
When you’re shopping around for a policy, make sure you find out if the elimination period is a one-time deal, or if it applies every time you need the help. A lot of people need long-term care more than once in their lives. Two or three elimination periods are a lot more expensive than one.
• A couple’s policy. Married couples often get a discount when they both take out a policy because insurance companies figure that couples are more likely to care for each other, at least for a while, before needing long-term care insurance.
Their policy benefits are often “pooled,” so that, for instance, if they both have a three-year term, that gives them a total of six years of coverage.
If one enters long-term care for two years and then passes, the other still has four years left on the policy. This “pool” principle also applies to the daily benefit. If, say, Dad uses a third of the total benefits, and then dies, Mom still has two-thirds left to fall back on;
• Length of coverage. You can get policies for whatever length of time you want, including unlimited lifetime benefits, but they are very expensive and often unnecessary. The average length of stay in a nursing home these days is between two and three years. That number may well go up as Baby Boomers age, but unless you’re made of hardy pioneer stock or are particularly stubborn, I don’t think a lifetime policy makes much sense.
• Inflation protection. This rider is a “must” for younger applicants and even a “definite maybe” for older people. You pick the level of protection you want (The latest estimate I saw insurance companies pushing was $210 per day.) and the rate of inflation you expect and this rider automatically increases your daily reimbursement that much every year, without increasing your premium. Whether you opt for this depends on your age and how long you expect to live. If you’re 60 when you take out the policy, inflation protection would be a good thing; if you’re 85, maybe not-so-good.
• The company. By law, once you’re in a plan, insurance companies cannot raise the premium on you as an individual, but they can raise them on an entire class. Before you sign on, do your homework and pick a company has never raised rates on long-term care policyholders.
• The Partnership. About 85 percent of longterm policies here are written in conjunction with the New York State Partnership for Long Term Care. Basically, the government wants to keep you out of a nursing home as long as it can because nursing homes are so expensive.
So to keep you out of the home, and to shore up its own Medicaid program, the state offers people the opportunity to sign up for long-term care insurance through a partnership. As an inducement, the state allows participants in the partnership to protect more of their assets from the five-year Medicaid “look-back” period than they otherwise would be able to.
Bottom line: You can protect more of your assets. The downside is that you may have to be a resident of the state to receive benefits. You may not be able to live in Florida and receive benefits through New York. Some Partnership states have reciprocal benefits however, and the rules can change, so you’ll have to check with a professional to be sure.
• The cost. Finally, you have to be sure you can afford to pay the premiums for long-term care, not only today, when you’re healthy and employed, but in the future, when you’re retired and the cash flow has dried up.
Kiplinger’s and John Hancock offer an excellent little video on long-term care at Kiplinger. com/your retirement/long-term care.
In the final analysis, the decision to provide for your long-term care requires a thorough, thoughtful examination of your needs, wants and assets, now and in the future — and in most cases — that necessitates the services of a professional to guide you through the maze.
