Many Baby-Boomers have helped one or more of their parents with the difficult emotional and financial decisions related to long-term continuing care. While Medicare covers skilled nursing care, it does not pay for continuing care in nursing homes or assisted-living facilities. Nor does Medicare pay for home attendants, who provide personal care, such as bathing and dressing, which can easily cost $500 or more a day. In response to their financial advisor’s recommendations and their involvement with their parent’s experience(s), many “Boomers” have purchased long-term care insurance to cover a significant percentage of these costs.
Long-term care insurance is expensive (over your lifetime you will likely pay tens of thousands of dollars in premiums for a quality individual policy) and it is important to note that all policies are not created equal. The insurers offer a myriad of policies with different terms (e.g., definitions of facilities, illness, sickness, etc.) and conditions, which can have significant coverage ramifications when the time comes to file a claim. Another complicating factor is trying to find unbiased advice when shopping for a new policy or comparing different policies.
Here are some basic questions to ask about your existing coverage or a new policy you are considering:
- What does the policy pay for? – Make sure the policy covers care at a wide range of facilities, including hospices, assisted living facilities, nursing homes and adult day-care. Determine if the policy will provide in-home care from a certified or non-certified health care professional.
- How is eligibility defined? – Clarify the definition of certain critical activities a person must be unable to perform, such as eating, dressing, bathing and getting from a bed to a wheelchair. Some policies require a person to be unable to perform 5 functions; others just three.
- How much will it pay? – Understand exactly what your policy will pay. Does it cover a percentage of certain costs or a percentage of “usual and customary” charges? The agent may have expressed the coverage as a flat amount, such as $10,000 per month; however, the insurer might say many of the expenses aren’t covered. Additionally, compare elimination periods, the period of time after you start receiving care before your benefits kick in, generally six months to one year in duration.
- Can you afford coverage? – One way to reduce the cost of your policy is to elect a shorter benefit period (i.e., one or three years of coverage versus five or seven years).
- Should you replace your coverage? – If you decide to replace your current policy, make sure you are able to get a new policy in effect prior to dropping your existing coverage. Insurer’s can’t exclude pre-existing conditions, but they can require waiting periods before coverage is effective or they may elect not to cover you.
Lastly, the time to act is now, as many of the major insurers are either no longer writing new long-term care insurance policies or have drastically toughened underwriting standards. Prudential, CNA, and John Hancock all have left the market in the last year and a half.