How to Pick a Long Term Healthcare Plan

The good new is Americans are living longer than ever. That's why finding the right long term health care plan to deal with the infirmities of old age and chronic illness has become increasingly important. The cost of a home health care aide is almost $20 a day. Assisted living facilities average almost $3,000 a month, and nursing home fees are more than $200 per day. Here's how to evaluate long term care insurance policies and find the one you may need.

Difficulty: Moderate

Instructions

1. Understand how long-term healthcare policies work. A long term health care plan pays a set amount from $50 to $500 a day. The payments can last from one year to life, depending on the plan benefits, but you have to qualify as incapacitated under the plan's definition.

2. Know the plan's definition of incapacity. All plans define incapacitation as the inability to perform ADL's--activities of daily living. These activities include dressing, feeding and bathing oneself, being ambulatory and having voluntary control of one's bladder and bowels. The inability to perform two or three of these basic activities, depending on the plan, qualifies the policyholder for benefits.

3. Read the fine print in the policy and understand the definitions. Most plans require meeting an elimination period before benefits begin. This period can be based on calendar days or on "care days." For example, a policy may require a 30 day elimination period. If the policy holder gets treatment once a week for one month, a policy that uses calendar days kicks in after 30 days, but a policy that uses "care days" may not start paying benefits until after 30 "care days," or 30 weeks have passed.

4. Learn how the policy pays benefits. Reimbursement policies pay you after you have paid for services out of your own pocket, and the time between your payment and reimbursement could take months. An indemnity policy pays the bills once you submit receipts for service. A cash policy pays you the daily amount directly at the predetermined daily rate, and you are responsible for paying the medical bills.

5. Consider buying a plan as long before you anticipate needing it as possible. The younger you are, the lower the premiums. However, younger people should pay the extra price for the "inflation factor." While premiums are not supposed to go up once you start the plan, insurers have historically raised premiums for all their policy holders when costs have exceeded actuarial expectations.

6. Make sure the policy you select is affordable over the long term. Like any insurance, the policy does you no good if you end up canceling it before you begin receiving benefits.

7. Get a second opinion before choosing a policy. Don't simply take the word of the seller on benefits and coverage. Have your CPA, a qualified financial planner or an elder-law attorney look it over first.