Berkshire Senior Online

Types of services covered - Most policies today offer coverage for a full range of care services. These services include home care, care provided at an adult day center, and care provided at assisted living, skilled nursing, or hospice facilities. These are called "integrated" or "Pool of Funds" policies. Pay particular attention to coverage for assisted living facilities (sometimes called "alternative care" facilities). These are increasingly popular since they provide help with ADLs or supervision for the cognitively impaired while encouraging independence and privacy in a home-like setting. Choosing a policy with flexible benefits will give you better options should your health require more care than can be managed at home.

Daily maximum benefit - The daily maximum benefit is the limit up to which covered expenses will be reimbursed. Most long-term care insurance policies are structured to pay a maximum dollar amount of care per day, also known as a "daily maximum." You choose your daily amount when you purchase the policy and it is very important that you choose it wisely. You do not need to insure the full cost of care. In order to keep premiums down you could plan to pay some of the cost yourself.

Benefit Length - Keep in mind tht the chances of needing long-term care for more than five years are relatively small. For most people, a policy covering three to five years will be more cost-effective. While lifetime coverage is an option for some people, the premium cost can be very high.

Eligibility for Benefits/Benefit Triggers - All policies contain provisions that determine if and when benefits are payable. The provisions companies use to determine benefits are sometimes called "benefit triggers." Benefits are triggered when someone can’t perform ADLs or due to a cognitive impairment such as Alzheimer’s disease. Typically benefits are payable when a person can’t perform a certain number of the ADL’s, such as two out of five, or two out of six. Be certain you understand what the company requires before it will pay benefits.

Inflation Protection - Inflation protection is essential to ensure that you have adequate coverage years from now. This protection is intended to keep pace with the cost of inflation. USHC recommends policies that automatically increase benefits at the rate of 5% annually (compounded inflation protection is recommended for people applying up to age 70 and simple inflation for those applying after age 70). This protection increases the costs of the policy but gives you coverage that will mean something when you need it. In order to afford this protection you may need to choose a shorter benefit length policy or a less comprehensive policy.

Tax Treatment - Policies issued after January 1, 1997, which provide tax incentives, are classified as "Tax-Qualified Policies" (TQ), and those without any tax incentives are classified as "Non Tax-Qualified Policies" (NTQ). Premiums for "TQ" policies may be included based upon your age as a medical expense if you itemize your deductions, and if your medical expenses exceed 7 ½% of your adjusted gross income, the excess is deductible. Policy benefit payments paid will not be taxed as income. Premiums for "NTQ" can’t be deducted as a medical expense and it is unclear if benefits received will or will not be taxable. Most policies issued before 1997 are "grandfathered" and are considered "Tax Qualified Policies."

Please note, we did not say: the right policy. No matter how good a policy sounds, it’s worth little or nothing if the company cannot stand behind it. Think of long-term care insurance as you would think of a long-term financial investment.

Consumers should only buy from companies that:

Have strong financial reserves and are likely to be financially sound far into the future;

Have a history of stable rates for their policies,

Are well-known and have an excellent reputaiton; and

Have a good track record for customer service and few reported consumer complaints.

Although there is no foolproof method for assessing a company’s financial strength, a useful measure is the company’s rating by independent rating services, such as Weiss Ratings, Inc. Many public libraries have this information. However, your agent should be able to show you the recommended insurance company’s rating. Remember to ask for the rating and its meaning before purchasing a policy. Also ask to see the company’s rate history for the past ten years on policies it offers. In addition, many state insurance departments maintain records of complaints against specific companies that are available for public review.

Seek expert advice and recommendations from consumer organizations, government funded agencies and professionals (insurance agents, brokers, and counselors) and financial planners, that have specialized training in long-term care and other related subjects.

Ask to see the Outline of Coverage or a sample policy of the plan you are considering. Do not rely on marketing literature alone.

Compare more than one policy from different companies. Become more informed on the subject by reading publications such as USHC’s "Long-Term Care Planning: A Dollar and Sense Guide" and the National Association of Insurance Commissioners’ "A Shopper’s Guide to Long-Term Care Insurance."

This Special Report was prepared by United Seniors Health Council to help consumers determine the appropriateness of long-term care insurance for their situation. Only the key points to consider in choosing a policy were discussed. There are additional considerations that go into the final selection of a policy. Following the tips listed above will help you make a wise decision for your individual situation.

United Seniors Health Council (www.united seniorshealth.org) publishes the nationally acclaimed "Long-Term Care Planning: A Dollar & Sense Guide" (2001 edition). The 100-page large format paperback sells for $19.50 (includes shipping). To charge your order with VISA or MasterCard call toll-free 1-800-637-2604 or send a check to USHC., 409 Third Street, S.W. #200 Washington, DC 20024.