Private insurance companies have developed a product
that can be used to insure against long-term care expenses, including home
care and custodial nursing home care. Long-term care insurance is
available through a variety of a different insurance companies with a
variety of different features, options and riders. It would be wise to
select a company that has a solid financial condition.
A. Evaluating the Need for
Insurance. When evaluating the wisdom of purchasing
long-term care insurance, the following questions and factors should be
1. The availability of personal resources to pay
for nursing or home care compared to the yearly premium for long-term care
2. The daily benefit rate paid by the insurance
company compared to the daily nursing home rate. The average nursing home
cost in Hawaii is presently $230 per day.
3. Will the payment of premiums jeopardize your or
your spouse's standard of living?
4. Your age and health status may determine whether
or not long-term care insurance is even available.
5. Your potential eligibility for medicaid
6. Are there family members that can be relied upon
should the need arise for long-term care?
7. Any pre-existing condition, restrictions?
8. The basic analysis is to compare the cost and
difficulty of paying the premiums with the potential benefits and the
necessity of receiving those benefits. According to a recent AARP
recommendation, generally, only those with annual retirement incomes over
$30,000 and assets of between $100,000 and $500,000 (not including their
home) should consider a long-term care insurance policy.
B. Evaluating the Policy. When
examining a long-term care insurance policy , the following provisions
should be reviewed:
1. Guaranteed Renewability. The policy
should be guaranteed renewable for life so that the insurer cannot cancel
the policy, except for nonpayment of premiums.
2. Deductible Period. The deductible period
provides a specific period of time before the insurance starts to pay. A
shorter deductible period is preferable, but a longer period may reduce
3. Grace Period. The grace period
allows the individual an additional period of time after the premium due
date for the payment of that premium before the insurer may cancel the
policy. This may vary generally from 7 to 31 days. It gives the
policy-holder some protection against the consequences of forgetting to
pay the premium on time.
4. Custodial Care Coverage. In addition to
coverage for skilled and intermediate care, custodial care should be
covered. Custodial care does not require a licensed medical professional.
It is an essential element of any coverage.
5. Home Care Coverage. Does the policy
provide long-term care in the individual's home, instead of in a
residential or nursing facility. Some policies offer this coverage only as
a rider for an extra charge.
6. Prehospitalization. Some policies require
the individual to be in a hospital before receiving long-term care, in
order for benefits to be paid. Many individuals do not go to long-term
care facilities directly from hospitals, so this requirement can result in
a denial of benefits at a crucial time.
7. Alzheimer's Coverage. A good policy will
provide coverage in the event of Alzheimer's disease. This disease is
generally described in policy language as "organically based mental
conditions." If such coverage is not specifically mentioned,
Alzheimer's is probably not included in the policy.
8. Inflation Protection. This feature
provides for the anticipated rise in the cost of long-term care. This
provision may substantially increase the premium.
9. Waiver of premium (in the event of a disability)
10. Premiums that stay level for life.
11. Consider having a maximum benefit period for
one stay of at least 4 years.
of Reasons for Long Term Care Insurance.
1. Covers the sometimes devastating costs of long
term care and thereby preserves the assets you may need later in life.
2. Permits you to be covered for nursing home
expenses during the 36-month look-back period when giving away assets to
qualify for Medicaid.
3. Helps you to preserve your independence.
4. Reduces the financial and emotional burdens on
5. It is easier to budget the insurance premiums
than it is to budget nursing home bills.
6. Allows you to choose where you want to stay
rather than have the government choose for you. (Only about 12 percent of
the nursing homes accept Medicaid,
and they are not necessarily the best available).
7. Provides peace of mind and eases worry regarding
paying for the costs of future health needs.