How to Avoid Common Mistakes When Buying Long-Term Care Insurance
Long-term care insurance is an integral component of a sound financial plan. It will protect your savings and investments, and give you more control over the quality of care you receive.
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Instructions
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Do not buy more or less coverage than you need. Select benefits and features that are suited to your financial situation. Many buyers purchase more coverage than they will need, or too little; both mistakes can prove costly. Evaluate your needs and goals for long-term care before you buy your policy.
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Verify what your policy defines as a LTC facility. While most LTC policies offer coverage for in-home care, assisted living facilities, adult day centers and nursing homes, the definition of each of these facilities will differ from policy to policy and state to state.
Find out from these long-term care facilities if they meet your policy's criteria. This is especially important if you intend to retire in a different state. -
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Buy a policy with as few Benefit Triggers as possible. These are pre-conditions that must be met before your LTC policy will pay for services. Ask what benefit triggers your company will use to determine when your coverage begins. Typically, benefits are payable when you cannot perform a pre-determined number of Activities of Daily living (ADLs), or if you suffer from a cognitive impairment, such as Alzheimer's disease. Your best option is the policy with the fewest benefit triggers.
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Inflation protection increases the value of your daily insurance pay out at the rate of inflation. This will ensure that years from now, when the cost of living will be much higher, you will still have adequate coverage. Without this policy feature, the real value of your daily benefits will have been drastically reduced at that future time. You may have paid thousands of dollars in premiums, for coverage that is insufficient to protect your assets.
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Comparison shop. Like car insurance, the cost of long-term care varies widely, based on the benefits offered, a company's rating methods and even their current marketing strategy. This difference in rates within the same state can differ by more than $500 for the exact same benefits.
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Evaluate each insurance company's financial rating. Choose a company that is well-established and highly rated in the industry. A company's financial stability is a strong indicator of its ability to pay claims. Ideally, you should buy from an A-rated company. The more As it has, the better its rating.
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Tips & Warnings
You can look up an insurance company's financial rasting at the A.M. Best website (see Resources below).
