Long-Term Care FAQs
Here are some of the frequently asked questions. We’ll also give you some guidance on our opinion of how a policy should be created.
What is Long-Term Care (LTC)?
Is long-term care just nursing homes?
How much does a long-term care insurance policy cost?
There are lots of choices setting up a plan. What are some guidelines to make sure I’m not buying too little or too much coverage?
How do I know if I should buy this coverage?
My employer offers this coverage. Is that the best policy available?
How do retirees pay for such coverage?
How rigid are the underwriting requirements?
Am I required to have a physical during the application process?
Do insurance companies ask family history questions on the application?
What happens if I die without using the policy?
Is long-term care insurance coverage good in all states, countries?
Who does the insurance company pay when there is a claim?
I have long-term disability insurance. What is the difference between that and long-term care insurance?
I’m not even close to retirement and I’m healthy. Why should I consider long-term care insurance now?
Why are we just now hearing about how important long-term care insurance is?
Can long-term care insurance premium rates be increased?
Wouldn’t I be better off putting money aside now to pay for my long-term care needs?
Is it possible to buy a paid-up policy?
What is Long-Term Care (LTC)?
Long-term care includes a wide range of medical and support services for people with a degenerative condition (Parkinson’s, stroke, etc.), a prolonged illness (cancer) or cognitive disorder (Alzheimer’s, Huntington’s). Long-term care is not necessarily just medical care. It is mainly custodial care. Custodial care involves providing an individual assistance with activities of daily living (ADLs) or supervision of someone who is cognitively impaired.
To better understand Long Term Care, think of the activities that you may have performed when you woke up this morning. You probably climbed out of bed, walked to the bathroom, used the toilet, took a bath or shower, got dressed, and ate breakfast
When we are healthy it is easy for us to take for granted the ability to perform the above activities of daily living. However, when you or a loved one is stricken with a degenerative condition such as a stroke or Alzheimer’s, performing all of these ADL’s becomes impossible without the assistance of another person.
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Is long-term care just nursing homes?
Long-term care can be provided in many settings including nursing homes, your own home, assisted living facilities and adult day care.
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How much does a long-term care insurance policy cost?
See our quoting engine to get a quote.
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There are lots of choices setting up a plan. What are some guidelines to make sure I’m not buying too little or too much coverage?
You’ll never know (until it’s too late) exactly how much coverage you should buy, but here are some guidelines for your choices (definitions for these terms are in the quote engine’s “policy wizard” and in the shopper’s guide -- we’ll assume you’re familiar with them).
Length of benefit - consider 4-6 years of benefit - definitely longer if Alzheimer’s or Huntington’s runs in the family, otherwise you only have about a 10% chance of staying in a nursing home longer than 5 years. It’s possible to have a longer stay, but not probable.
Daily benefit - consider a daily benefit 80-100% of your local costs depending on how much of the cost of care you want to self-insure. The best way to determine cost is to call a handful of facilities local to you or you can use our map [link - costmap.jpg - new pop-up window]. We’d caution going less than 70% unless you have significant assets and are just purchasing insurance to defray your out-of-pocket costs.
Elimination period - We recommend 90 or 100 days. With the good policies this is a once-in-a-lifetime deductible. Also, instead of getting a policy with a shorter deductible, we’d rather you spend the additional money on more daily benefit or a longer benefit period. In other words we like a 6-yr plan with a 100-day elimination period better than a 3 or 4 year plan with a 0-day or 20-day elimination period.
Inflation options - Everybody has their opinion on this and here’s ours. If you’re under the age of 75 buy simple or compound coverage. If you’re under the age of 60 buy compound inflation coverage.
The bottom line is that more coverage costs more money. If you want the best coverage, buy the most that they’ll give you. We’d be certainly happy to sell it to you. On the other hand, you can buy less than the “best” and still provide adequate coverage to accomplish the goal – to keep you from going through a lot of your assets quickly.
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How do I know if I should buy this coverage?
No need to bore you with “rules of thumb” here. You’re in one of three categories, 1) you can afford an extra $5,000/month expense without changing your standard of living, 2) you would have a significant amount of assets wiped out by a 100-day deductible alone (100 days X $150/day = $15,000), or 3) somewhere in the middle. If you’re in the middle you should buy long-term care.
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My employer offers this coverage. Is that the best policy available?
Not necessarily. Group coverage is usually offered with no or little underwriting meaning that they take more people in without regard for their health status. To offset this lack of underwriting they charge more. Normally for traditional medical insurance you may not see this increase because your employer is contributing to the health plan. For long-term care insurance, it is very very rare that the employer is contributing -- meaning that in most cases the group plan will cost more. Our advice is to attempt to secure the individual coverage first and use the group as a back-up. We’ll help you.
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How do retirees pay for such coverage?
Many people have found effective ways to pay the insurance premium by using interest from general savings, dividends and annuity income.
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How rigid are the underwriting requirements?
Insurance companies vary on this issue. If you have recovered from cancer or heart problems for example, some companies want you to be recovered two years, some five years. If you are recovered with no current treatment and no complications, you can usually get a policy. Progressive conditions, such as Parkinson’s, Alzheimer’s or severe rheumatoid arthritis, are uninsurable. You need to apply BEFORE these conditions arise. Also, multiple conditions such as diabetes and heart problems or multiple strokes can be difficult to insure. Companies are becoming stricter on osteoporosis, which makes it important for women to apply for coverage at younger ages because osteoporosis is common with older women. Conditions like hypertension are usually insurable if well under control. Most companies will accept diabetes controlled by diet, and some companies will even accept insulin-dependent diabetics (commonly up to 50 units/day). The only way to find out for sure is to apply – there is never an obligation to go through medical underwriting. We’ve sent applications to three different companies to shop for our clients. And, if we think it’ll help, we’ll do it for you too!
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Am I required to have a physical during the application process?
Normally, no. The insurance company usually just checks your medical records at your primary care doctor (and sometime specialists). The insurance company may ask you to see a doctor if you have not seen one in many years. Many companies require a face-to-face assessment for cognitive impairment if you are past a certain age, usually 75. People who apply for long-term care insurance over the telephone can expect a medical person, such as a nurse, to bring the application by to witness the signature and observe your overall health condition. Also, be prepared for a phone interview that will go over cognitive items as well as medical questions that were on the application.
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Do insurance companies ask family history questions on the application?
Not today. There is a concern that they might in the future, especially regarding family history involving Huntington’s or Alzheimer’s. If you have anyone in your family with Huntington’s or Alzheimer’s buy this coverage as soon as possible.
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What happens if I die without using the policy?
Generally the same as if you never wreck your car with car insurance. We call that the best case scenario – for you and the insurance company. Most new tax-qualified plans won’t allow a return of premium feature if you terminate your policy without using it.
Policies that do have a return of premium feature are not tax-qualified policies. This option allows you to get your premiums back (based on a schedule) if you terminate your policy or if you die without using it. This feature typically adds another 30% or more to your premium for the life of the policy. This option can be costly so you may either want to avoid it or buy a life insurance policy or annuity instead.
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Is long-term care insurance coverage good in all states, countries?
They’re good in any state and most will pay for coverage in Canada, but only a few will pay outside of the U.S. & Canada.
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Who does the insurance company pay when there is a claim?
That depends on the policy and you. Reimbursement policies will either pay you to cover paid expenses or they’ll make payments directly to the provider. Indemnity plans, plans that pay a fixed amount regardless of expenses, usually make payments directly to you.
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I have long-term disability insurance. What is the difference between that and long-term care insurance?
Disability policies only provide money to replace income lost due to a disability. Long-term disability insurance is intended to pay living expenses, such as a mortgage, rent, utilities, food, etc. It doesn’t provide an extra $3,000-$6,000 a month to pay for long-term care. Also, group disability insurance is usually tied to employment and you lose it when you leave your job.
Long-term care insurance pays specifically for long-term health care, such as home health and nursing home care and is a policy you can always keep no matter where you bought it.
Finally, if your employer is paying the premium for your long-term disability insurance, you will be taxed on the benefits if you have a claim. This isn’t true with long-term care insurance. The benefits are tax-free. If you’re still working and can’t afford both, one of our carriers has disability policy that will convert to a long-term care policy when you retire.
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I’m not even close to retirement and I’m healthy. Why should I consider long-term care insurance now?
Long-term care insurance products are age-rated and health underwritten. Meaning younger healthy people will pay much less than their older counterparts that may take a few medications. You will pay longer by starting earlier, but you’ll pay less total premium than if you waited until an older age to purchase a policy. Adults of all ages need to seriously consider a policy.
Finally, there’s a hidden cost of waiting that most people don’t think about. Today you might be able to buy a policy for $140 a day to cover most of the cost, but ten years from now you would have to buy a policy for about $230 a day, plus you would be paying premiums based on you being 10-years older.
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Why are we just now hearing about how important long-term care insurance is?
Long-term care insurance has been around since the 1960’s. But, meaningful policies were developed just in the last two decades in response to the escalating demand for insurance brought about by an aging population, changes in family structure, and a shift away from the hospital setting.
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Can long-term care insurance premium rates be increased?
Yes, but only if they go up on an entire classification of policyholders in the whole state. Companies that practice competitive pricing, conservative underwriting and that are financially very strong have the best chance of holding down rates in the future. Conservative access to benefits such as the requirement in tax-qualified policies for a 90-day certification also plays a significant role in holding rates down.
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Wouldn’t I be better off putting money aside now to pay for my long-term care needs?
No, but if you need an example let’s assume that each year a person could (and would) put money aside for their long-term care needs. A fifty-year-old person that saved $1,600 a year — the premium for a policy that would pay about 2/3 of the cost for three years — and earned 10 percent for 30 years would have saved enough money to only pay for about two months of care at future prices.
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Is it possible to buy a paid-up policy?
It is rare, but there are a few versions of paid-up insurance available. One version is really a lump sum life insurance policy or annuity which will work if you put enough money in it — probably $100,000 or so for a 60-year-old couple. There are a few long-term care policies approved in some states that have single-pay, 10-pay or 20-pay options. The payments could go up during the payment period (except for the single-payment), but not afterward.
A word of advice -- don’t try to put a lot of weight on certain features that only one or two companies have. This will cut down on your ability to shop all of the good companies.
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