Choosing Long Term Care Insurance -- Part 1

During the course of our myth-busting we have seen that Long Term Care is very expensive, is very likely to be needed, is not covered by other types of insurance, and strains family relationships. So, if you are choosing a Long Term Care policy, then which one is right for you?

Selecting Long Term Care Insurance may affect your and your family's future more than any other single decision you will make. Also, the process can be complicated at times; so don't go it alone. Just as you would seek an attorney's assistance to draft a will, you should seek out a licensed insurance agent who is trained in Long Term Care when you are considering such insurance. Finally, you should ask loved-ones or family members to be present with you while you consider your options.

The key to selecting the best Long Term Care Insurance for you is the policy's benefits. Your health insurance likely has a deductible. Usually the higher the deductible the lower your premiums. Most Long Term Care Insurance has a deductible in the form of time called a waiting period. A waiting period is the number of days you will pay (or wait) before the plan begins paying.

For instance, if your doctor certifies that you will need Long Term Care on April 1st and your policy has a 30-day waiting period, then your plan would not start paying towards your Long Term Care costs until on or about May 1st. Although longer waiting periods will reduce your premiums, you should do your best to ensure that you can afford to pay for your Long Term Care out of your pocket before your insurance begins coverage.

Although your personal situation and expectations should be taken into consideration, I would recommend the following waiting periods as a general guideline based on your total assets not including your primary residence and primary automobile:

• If your assets are less than $100,000, then select a waiting period of 30 days or less.
• If your assets are between $100,000 & $500,000, then select a waiting period between 60 & 90 days.
• If your assets are more than $500,000, then select a waiting period of 100 days or more.

Another decision to make regarding Long Term Care Insurance is the daily or monthly benefit, which is the amount of money the policy will pay each day or month that you need Long Term Care. For instance, if you were drafting a plan in the Carolinas to pay for either round-the-clock care in a nursing home or approximately 10 hours per day of home health care, then you would want a daily benefit of about $160 or a monthly benefit of about $5,000. Your daily or monthly benefit may need to be adjusted higher or lower depending on where you live, your preferences regarding your care, or if you have other means to pay for care.

Closely related factors are your benefit period and benefit maximum. Benefit period refers to the length of time you can receive benefits, and benefit maximum refers to the amount of money you have for benefits. The majority of people receiving Long Term Care will need it between 6 months and 5 years. Most of these will receive care from 1 to 3 years.

For example, if your policy's benefit period is 60 months or 1,825 days and your benefit amount is $5,000 per month or $160 per day, then your benefit maximum would be approximately $300,000. Depending on the specific details of your plan, your coverage may end either when your benefit period ends or when your benefit maximum is spent.

Personally, I would prefer a policy that pays until the benefit maximum is reached. Let's say that you have the above policy but your care only costs $80 per day instead of the anticipated $160 per day. If your policy ends with your benefit period, then after 60 months your coverage ends even though it only paid out half of what it was worth. On the other hand if your plan doesn't end until your benefit maximum is spent, then it essentially creates a bucket of money ($300,000) to draw from. Although at $160 per day it would be exhausted in 60 months, if your care only costs $80 per day, then it would last 120 months.