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Money Muse
Money MuseEvaluating Long-term Care Insurance
By Marko Tubic
May 23, 2002 -- Each year, cars are destroyed in auto accidents, and most car owners are covered. Each year, homes catch fire, and most homeowners have insurance coverage. And each year, millions of people age 65 or over will have a long-term nursing-home stay--yet only a small fraction of these people are covered.As the population of older Americans increases, so does the need for nursing-home care. As a result, long-term care insurance has become a necessity for many people. This type of insurance can be an inexpensive way to protect life savings from the devastating costs of a lengthy nursing-home stay.
In addition, individuals may be able to deduct long-term care insurance premiums (subject to certain limits) just like any other medical expenses that exceed 7.5 percent of adjusted gross income. The tax break applies to all long-term care policies issued before 1997. Those issued on or after January 1, 1997, must meet federal guidelines to qualify for the deduction. In addition, long-term care benefits may be excluded from taxable income.
This is good news for many Americans. As the baby-boom population ages and life expectancy increases, the need for long-term health care also increases. There are an estimated 35 million Americans over age 65, and this segment of the population is expected to double by 2030, according to the National Institutes of Health. With nursing-home costs skyrocketing and Medicare paying about three percent of those costs, few people have the financial resources to handle a long stay in a nursing home.
Long-term care insurance can answer this need. It can help cover the cost of a nursing-home stay, home-care and other types of long-term care for as long as the patient needs them. When evaluation long-term care insurance, look for the following features.
Financial Quality of the Company
Choose a long-term care insurance provider that is highly rated by respected rating agencies. Look for at least an "A" rating from A.M. Best and at least an "A+" by Standard & Poor's and Duff & Phelps.
No Age Limits
After you're accepted for coverage, your policy should pay benefits no matter what age you are when you file a claim.
Coverage for All Levels of Care
Your policy should pay benefits no matter what level of care you receive, from short-term skilled nursing to long-term custodial care.
Parkinson's, Alzheimer's and Senility Coverage
Look for policies that cover these common conditions. No policy will cover these problems if they are pre-existing.
Stable Premiums for Policyholders
Once you're covered, your premiums should remain unchanged. Most companies reserve the right to increase premiums for a group or class of policyholders, but look out for companies that historically have raised rates for policyholders.
Claims-payment History
Be certain that the company has a solid track record of paying claims and providing timely service. Some companies audit and publish their historical claims track record annually.
Cheapest is Not Always Best
Many policies have low premiums and offer features that you may find attractive. A word of caution: you're buying a benefit that you may not receive for many years. Rate increases and inadequate service will quickly negate any benefit of a low initial premium.
These are a few things to look for in long-term care insurance. Be sure to evaluate a number of policies from several reputable companies, and only buy insurance from someone you trust.
If you ever require a nursing-home stay, the last thing you want to worry about is the cost. Fortunately, our legislators are beginning to recognize this problem and have passed new tax laws to make long-term care insurance more affordable. Long-term care insurance not only can protect your savings but also prevent you from being a financial burden on your loved ones.
Marko Tubic is with the Fremont Edward Jones Office @285-1777.
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