|Long-term care insurance: 12 questions
How long will the policy pay out once it's
The best is an unlimited payout, but there
are policies that cover smaller increments of time, such as four
years or six years. You'll need to weigh what you can afford against
how much you're willing to gamble you'll need. Obviously, the longer
coverage is provided, the better.
What triggers the policy?
Different policies dictate different reasons
for the policy to kick in, such as cognitive impairment, failure
of ability to perform daily activities, and medical impairment.
But not all policies allow for all reasons, and some policies even
refuse to consider medical necessity as a trigger. Make sure you
understand the policy's trigger, and try to find one that will include
Also, certain policies require you to be hospitalized
before any nursing home or home health care benefits kick in. Try
to find a policy without this restriction.
How much will it pay out every day?
Some policies may cover expenses totaling
more than $50 or $75 per day, and others may cover $200 and up.
All are different. Make sure you fully understand the payout policy
on any coverage you're considering. In doing so, take into account
the difference in potential nursing home costs where you are. For
example, the cost of a nursing home in New York may run $300 to
$400 per day, while a home in the Midwest may be less than $100.
What is the deductible?
This part gets especially complex. These
policies can measure the deductible not in dollars, but in days.
A policy's deductible may run 30 days, 60 or 120. And, the length
may mean different things, depending on the policy's wording. The
days may be consecutive, or not. The deductible that's right for
you will depend on your ability to cover your own costs until the
policy kicks in.
Be sure you fully understand the implications
of the deductible before signing on, and weigh it against your projected
assets at age 70 or 80. This is one topic you should definitely
discuss with your financial adviser.
Does the policy have inflation protection?
Many policies include a clause that increases
your benefit with inflation, without raising your premium. Be sure
to ask about it.
Does your policy allow for shared care?
Some policies allow you to link your policy
with your spouse's, so that if your coverage runs out, you can draw
on your spouse's coverage. Discuss with your spouse if this is something
you want to have.
Make sure you fully understand every aspect
of a policy before signing on, as any detail could make a big difference
come redemption time.