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February 1999MANAGING YOUR FINANCESBuying Long-term-care InsuranceThe long-term-care insurance (LTCI) market is evolving rapidly, with new policies and features being added to reflect consumer demand and the changing nature of caregiving services. Twenty years ago, the concept of assisted living didn’t exist and the early long-term-care policies focused on nursing homes. Today, the emphasis is on home care. If that’s not possible, many people prefer an assisted-living facility that offers help with such tasks of daily living as dressing and bathing, rather than the intensive and more expensive care available in nursing homes. The newer LTCI policies offered by top-rated carriers reflect that trend. When shopping for an LTCI policy, deal with large, well-rated, experienced insurance companies that are sure to be there for you 10 or 20 years down the road when you may need them. They are the ones most likely to keep their premiums stable year after year and honor your claims hassle-free when the time comes to use the benefits. Shop and CompareShop and compare prices and terms. Price alone is not reason enough to choose one policy over another, and the numbers do not tell the whole story. That’s why you need an expert insurance broker—preferably one who represents several major companies—to help you navigate the maze of fine print, unfamiliar terms and variations in how a service is delivered. We suggest looking at the policies of at least two or three big issuers, such as CNA’s Preferred Advantage 100, GE Capital’s Privileged Care Select II, John Hancock’s Advantage Gold Select, Travelers’ LTC 4 and UNUM’s LTC 94. Procrastinators pay more. Each year you delay purchasing an LTCI policy, premiums increase by about 8%, says Robert Davis of Long-Term Care Quote in Chandler, Ariz. (800-587-3279). It may take several weeks to process an application, so if you are nearing a birthday and considering LTCI, don’t delay. Some companies will backdate your application up to a month to lock in a lower price. Others won’t. Most insurers will allow you to buy LTCI up to age 84—some even older. Restrictions may apply if you are 80 years or older at the time of application. Travelers, for example, offers limited benefits to spouses age 80–84 if the insured spouse is under age 79. Pick a daily benefit based on where you live. The policies in our table will pay a $100 daily benefit for care delivered in either a facility (assisted living or nursing home) or at home. Depending on where you live, this may or may not be adequate to cover long-term-care costs in your area. Or you may decide you just want to insure part of the daily cost of care and make up the difference from your own funds. Some LTCI policies offer a home-care benefit at 50%, 75% or 80% of the maximum daily rate for facility-based care. Investigate the going rate for home care in your area before you decide. It’s probably more expensive than you think, and you may want to buy the most coverage you can afford. Analyze the real cost of long versus short elimination periods. When shopping for an LTCI policy, ask for comparison prices of policies with varying elimination periods—the amount of time that elapses before your insurance benefits begin—so you can find one with a premium you can comfortably afford that offers you sufficient protection. Keep in mind that with health-care costs rising faster than the overall rate of inflation, out-of-pocket costs will be much higher in the future than they are today. For comparison’s sake, the policies in our table assume a 90- or 100-day elimination period, depending on the issuing company. Shorter elimination periods give you more protection but will increase premiums. However, a shorter elimination period can save you considerable out-of-pocket costs in the long term. Consider at least a three-year benefit period. Usually, that’s the minimum coverage you should buy and enough to cover the average nursing-home stay. If you can afford a higher premium, consider a longer or even a lifetime benefit period. Match your age with the need for inflation protection. The younger you are when you purchase an LTCI policy, the more you need automatic compounded inflation protection. If you are looking to save money on premiums, and you are 70 or older at the time of purchase, you could scale back. For help with making that decision, see p. 5 of our Dec. ’98 article on LTCI. Individual vs. group policy. What about buying an LTCI group policy such as the MetLife plan offered through AARP? "A lot of times, a group plan is not as state-of-the-art as individual policies, and the premiums can be higher," says Bill Wetmore, vice president of sales for BISYS Insurance Service LTC Marketing Group in Reisterstown, Md. (800-678-4582). "But sometimes, the underwriting is a little more liberal and can be more favorable to people applying at older ages," Wetmore adds. Don’t Overlook Health and Marital DiscountsThe policy prices shown in the table do not reflect the discounts that many companies offer for good health and spousal discounts. These can save you significant amounts of money. GE Capital and John Hancock offer a 10% discount for preferred health status; CNA 15% and UNUM 20%. Travelers does notoffer a premium break for good health. All five companies offer additional discounts ranging from 10% to 20% for married couples who purchase two policies. Some companies in some states will give you a 10% discount if both of you apply but only one is accepted. Nancy Morith, an LTCI broker in Princeton, N.J. (800-793-4422), says a person’s health and marital status often dictate which policy to choose. "If I’m working with a married couple in excellent health, I’d probably look at Travelers first. But for an unmarried individual, its rates can be high," Morith says. In the case of a healthy single individual, CNA might be his or her first choice. If health is an issue—and each company has different requirements—Morith says she looks to companies with the most lenient underwriting guidelines. Wetmore says obtaining a policy may also depend on the type of health condition. "CNA is fairly liberal with its preferred health criteria because it will consider someone who has controlled high blood pressure or high cholesterol." Other carriers with preferred rates tend to be more restrictive for those health conditions, he adds. More Improvements ComingMost LTCI policies sold today are better by far than they were 10 years ago. And they’re still improving. Better home-care payment options. The biggest trend is toward offering more flexible home-care options. CNA has just introduced a new series of policies called Preferred Solutions—not yet approved in all states—that allow reimbursement for nonlicensed caregivers, including family and friends, rather than requiring care from a more expensive licensed agency aide. The new policy (not the CNA policy shown in the accompanying table) also establishes a weekly maximum benefit amount, rather than a daily amount for home- and community-based care. This enables policyowners to choose more care on the days they need it as long as costs don’t exceed the weekly maximum benefit. More generous premium waivers. Another trend is to waive premiums or elimination periods under certain conditions. Most companies will waive your premiums once you begin receiving benefits in a facility or in your home. CNA’s Preferred Solutions policy offers a dual waiver-of-premium rider that allows both spouses’ premiums to be waived if one of them meets the waiver-of-premium conditions. On the death of one spouse, CNA’s survivorship rider enables a surviving spouse to receive a permanent waiver of premiums if the policy has been in force for at least seven years. GE Capital and Fortis also offer a survivor benefit if one spouse dies and the policy has been in force for at least 10 years with no claims. Benefits for using care coordinators. GE Capital will waive the elimination period for home-care benefits if you use its care coordinator. "If you can accept the use of a care manager, it’s a nice plan," says Morith. |
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