What type of long term care insurance should I get?

Janell Sluga Medicare & Individual Health Insurance Account Executive View Bio

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Question:

We have been considering Long Term Care Insurance (LTCI), and would like to know what you recommend?

Answer:

Long Term Care Insurance (LTCI) can be a useful tool to help pay for healthcare services you or your spouse may need in the future. LTCI has changed significantly in recent years and offers many more options and alternative policies.

I have talked with individuals who already have LTCI and want to begin using it to help pay for their care, and I’ve also helped them evaluate whether or not LTCI is a useful purchase.

It is important to understand how LTCI protects you and helps pay for care. LTCI usually reimburses you for care you have already paid for. It does not pay for ALL your care. The LTCI plan will pay for as much care as your individual policy was set up to pay (usually a set dollar amount per day or month). If your care costs more than that benefit amount, you will pay the difference. If the care costs less than that benefit amount, you are reimbursed up to the amount you paid. For example, potential benefits could be $150 or $219 per day, or $4000 per month.

The type of LTCI policy you purchase greatly impacts the premiums you will pay. The larger and more generous the policy, the larger and more expensive the premiums you may pay – and LTCI premiums can be very expensive ($400 per month or more).

The goal when buying these policies is to help pay for care, and to protect your assets. A good LTCI policy will help you pay for care without requiring you to use your life savings to pay for the monthly premiums. If paying the premiums leaves you short on paying your current bills, you aren’t necessarily doing yourself any favors.

When reviewing types of policies, the most common plans will cover homecare services, assisted living facility care, and care in a skilled nursing facility. I highly recommend you have a policy that works in all settings. You don’t know where your care is going to happen when you get to this stage of your life. A good policy will help to cover the cost of care wherever you end up.

Your LTCI policy should be large enough to pay for most of the care you need. If you have a policy that is $200 per day and you live in a skilled nursing facility that costs $395 per day, you will have to pay the $195 difference. That covers more than half of your costs, but still costs you a significant amount of money each month.

A policy that pays $350 per day, when your care only costs $196, means the excess daily amount stays in your policy to be used at another time, allowing the policy to last longer.

There are many new types of LTCI policies coming out all the time. One of the newer ones I recently reviewed included both the LTCI benefit along with a Life Insurance benefit. If you didn’t use up the LTCI benefit amount, the balance would be paid out at the end as a Life Insurance Benefit. That is a guaranteed payout either way.

I have also seen policies that cover both spouses. It is one LTCI policy, with the usual cap in benefits, but either spouse can use it. This can be a very useful benefit since we never know who will need care first, or at all.

I believe LTCI can be a useful tool as you age. It is important to understand you will probably pay the premiums for 15 or 20 years or more before you begin to receive benefits.

In reviewing this type of coverage, I would recommend getting one or more quotes for LTCI policies, then review the policies and the options in comparison. It helps to get different perspectives on types of policies and benefits.

I have helped people use LTCI to pay for their care. I have seen many people “save” the LTCI for someday and never actually get out what they paid in premiums or get reimbursed for care because they didn’t file a claim with the LTCI.

I really like the newer LTCI policies that include a Life Insurance benefit or cover both individuals as you are most likely to use the policies and get your investment back. Deciding on an LTCI policy is very important and there is a quite a bit to learn about before you make that decision. Be sure to ask questions and review your policies with family so they can help you make this decision, and make sure they know when you do decide to purchase a policy.