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Analyze long-term care insurance

By Jennie L. Phipps · Bankrate.com
Monday, June 20, 2011
Posted: 11 am ET

My husband and I received our annual long-term care insurance bills Saturday, and sometime in the next month, we'll each have to write hefty checks. Our combined bill comes to $3,367, which is not small potatoes.

When we bought the insurance 10 years ago, we considered using the monthly payment plan offered by the insurer. But after doing a little math, we concluded that financing these plans is a significant profit center for this insurer. We were already paying plenty and didn't want to give the insurer another nickel more than we had to, so we save up and pay the bills all at once.

Buying long-term care insurance is a major financial commitment, and anyone living in retirement or doing retirement planning can't afford to make a mistake.

Attorney Frank Darras, who specializes in insurance litigation, tells buyers to go to their state's Department of Insurance and do research before they sign on the dotted line.

He advises first analyzing the record of any insurer from which you propose to purchase a policy. Insurance is regulated at the state level. Find out what would happen to your long-term care coverage if the company you buy from is sold or goes out of business.

Other questions to ask are:

  • How long has the company you propose to buy from been selling long-term care insurance? You want a company with a long track record.
  • How many new policies does the company sell in your state every year? Bigger is generally better.
  • How often has the company requested premium rate increases and at what percent? Regular requests for large increases are a sign that the company didn't analyze the costs very well to begin with and could suggest instability. Even requests for small increases regularly will add up.
  • How big is the company and do they have a strong financial record? A major household name-brand insurance company is usually a more stable bet.
  • What kind of media coverage is the company receiving? Are there any market-conduct investigations or class-action lawsuits making news?
  • Are there current legal actions against the company or punitive damage verdicts assessed in the past five years?
  • Does the company pay claims promptly and reliably?

We hope we'll never use our long-term care insurance, but it's there if we need it.

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4 Comments
Ann Robinson
June 20, 2011 at 4:02 pm

I've had a LTC policy for 12 years--pay monthly $168. I work full time, but am unmarried and no family, so I felt I needed to do this for protection. I fell moving a heavy item this past January--broke my hip--off work for six weeks. I was thrilled to have an aide for bathing/dressing/housekeeping/chores/shopping until I could return to work, and I was reimbursed weekly by the insurance company upon invoicing by the provider. Glad I made the decision to buy a policy.