Shopping for Long-Term Care Insurance
If you have investigated long-term care insurance for yourself or for someone else, you´ve probably encountered complicated options, unfamiliar terms, and difficult calculations. Since long-term care insurance isn´t standardized in Texas, every policy is different. In general, however, there are some questions you should ask about each policy you´re considering:
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- What types of care are covered and in what setting? Policies can offer a full range of services, including home health care, adult day care, assisted living facility care, and nursing home care. Policies are required to cover all levels of care from custodial to intermediate to skilled care.
- What are the benefit eligibility requirements? Policies won´t pay until you´ve satisfied certain requirements, such as being unable to perform tasks called activities of daily living or being certified as cognitively impaired. The benefit eligibility triggers may vary from policy to policy.
- How much is the daily benefit amount for each type of benefit? Most policies will pay a maximum daily amount for your care. You choose the maximum daily benefit when you purchase the policy. It´s important that you choose your benefit amount wisely. Keep in mind that you do not need to insure the full cost of care. To keep premiums down, you could plan to pay some of the cost yourself.
- How long will benefits be paid? The chances of needing long-term care for more than five years are relatively small. For most people, a policy covering three to five years is appropriate and more cost-effective. However, if you´re concerned about contracting a disease requiring more care, such as Alzheimer´s, you may want to consider the more costly option of lifetime coverage.
- Does the policy have a pre-existing condition waiting period? If so, how long is it? Some policies won´t cover a pre-existing medical condition until after a certain period of time has elapsed. Some policies will pay for care related to a pre-existing condition immediately if you disclosed the condition on your application. Make sure you know what the policy says about pre-existing conditions.
- What inflation protection is offered? Inflation protection helps ensure that you have adequate coverage in the future. All companies must offer an automatic increase in benefits at the rate of 5 percent compounded annually. If you reject inflation protection, the rejection must be in writing. The company may also have other options for inflation protection. Remember that to be prepared for inflation, you must pay ´a higher premium today or higher out-of-pocket costs later.
- What is the nonforfeiture benefit? All companies must offer you a nonforfeiture benefit. If you reject the nonforfeiture benefit, the rejection must be in writing. If you cancel or lapse your policy after a specified number of years, the insurance company will either return a percentage of the premiums you paid; extend benefits for a period of time equal to the premiums paid, less any claims; or provide a greatly reduced benefit.
- Is the policy tax-qualified? If you buy a tax-qualified policy, you can deduct part of the premiums you paid as a medical expense on your income taxes. Benefits paid from a tax-qualified policy are generally not considered taxable income. The policy must disclose if it is intended to be tax-qualified or non tax-qualified.
- Can I upgrade the policy later by purchasing more benefits? Some companies allow you to upgrade your policy after purchase. However, you will likely have to complete and submit a new medical questionnaire.