Long-Term Care

(continued)

Common Provisions In Long-Term Care Policies

A. Amount of the Benefit: Most policies pay for a qualified expense up to a daily maximum amount for each day you are eligible for the benefits; e.g., $80 per day. A survey of nursing homes in the local area can help determine the desired amount.

B. Inflation Protection: Since costs inevitably increase, a policy without a provision for inflation may be outdated in a few years. Of course, an additional charge is incurred for this protection.

C. Guaranteed Renewability: This important provision will prevent the insurance company from canceling your policy for as long as you continue to pay the premium when it is due. However, the insurer can raise rates on a class basis.

D. Waiver of Premium: Some policies will waive the future premiums after you have been in the nursing home for a specified number of days; e.g., 90 days.

E. Prior Hospitalization: This provision requires one to be hospitalized (for the same condition) prior to entering the nursing home or no benefits will be paid under the policy. This is an undesirable provision.

F. Place of Care: Does the policy require that the nursing home be licensed or otherwise certified by the state to provide skilled or intermediate nursing care? Must the facility meet certain record keeping requirements?

G. Level of Care

Three generally recognized levels of care:

1. Skilled Care: Daily nursing and rehabilitation care under the supervision of skilled medical personnel; e.g., registered nurses and based on a physician's orders.

2. Intermediate Care: The same as skilled care, except it requires only intermediate or occasional nursing and rehabilitative care.

3. Custodial Care: Help in one's daily activities including eating, getting up, bathing, dressing, use of toilet, etc. Persons performing the assistance do not need to be medically skilled, but the care is usually based on the physician's certification that the care is needed.

H. Pre-Existing Conditions: Most policies limit coverage of pre-existing conditions to discourage persons who are already ill from purchasing the policy. Many policies will provide benefits if the pre-existing condition was overcome six months or more prior to applying for the policy. Also, some policies will not pay benefits if the pre-existing condition re-occurs within six months after the effective date of coverage.

I. Deductible or Waiting Period: Most LTC policies require you to "pay your own way" for a specified number of days (generally ranging between zero and 120 days) before the insurance company will begin to pay benefits. Of course, the shorter the waiting period, the higher the cost will be.

J. Period of Confinement: This important provision indicates how long a person can stay out of the nursing home before being readmitted for the same condition, without being required to go through a new waiting period (or deductible). The period should typically not be less than 90 days. Most policies today require the waiting period (or deductible).

K. Alzheimer's Disease: Most policies now include coverage for "organic brain disorders" like Alzheimer's disease. However, problems of this nature often do not begin with a visit to the hospital and could, therefore, be excluded if the policy requires prior hospitalization.

L. Home Care: Does the policy offer home care coverage? Some companies offer it as a rider to the policy for an additional premium. Make certain that it supplements Medicare coverage and does not just duplicate it.

M. Rating the Company: Companies should be financially sound and have a reputation of treating policyholders fairly. As policies improve, better companies will be more apt to allow you to upgrade to a newer policy.

Comment: The "management of risk" is a crucial part of financial planning. The potential need for long-term care is a genuine risk. The prudent estate owner will examine long-term care insurance to see if it has a proper place in his or her overall financial plan. Once the disabling condition appears, it is obviously too late to act.

Note: There is not a "perfect" LTC policy--many policy features must be compared. As one would expect, the more benefits that are included, the higher the premium will be. Professional guidance is extremely important in this complicated area.

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