Long-term care insurance: details decisions and dollars

This month I complete a two-part column discussing an expense that many of us put so far on the back burner it's probably on a hot plate in the shed behind your clinic.

At a time when the economy teeters on a recession and many have made mortgage and other loan commitments which they are having trouble keeping current, it is hard to sell the idea of buying insurance which isn't to be used until old age.

Nonetheless, as we approach our 50s and 60s, we owe it to ourselves to undertake a comprehensive financial plan, not a piecemeal one in which we leave out items that are inconvenient to finance or uncomfortable to think about.

As I mentioned last month, it is unrealistic to expect that Medicare and/or Medicaid will be available in any meaningful way to finance our nursing-home needs or in-home care. Congress regularly passes new legislation that limits further the accessibility of such coverage.

So, assuming that your financial plan and estate plan call for long-term care insurance, let's look into the who, what, where, how and when of the many policies competing in the marketplace:

First, from whom should you buy the insurance product? There are a bazillion agents and companies who would like to sell you a long-term care policy, but many are looking out more for a commission than for your best interests. I believe that a well-known, reputable insurer should be selected, rather than a low-cost carrier with questionable financial resources.

Even if you are looking to buy this type of coverage in Wyoming or Nevada, I think it is wise to find out if the insurer you are considering is licensed to sell policies for long-term care in California and New York. These states have very robust insurance-regulating agencies and particularly demanding requirements for insurers. So, if an insurer can sell policies in New York or California, its finances probably have been fairly closely monitored. Beware the advertising tag line: "Not licensed in all states..."

Further, you should look at multiple carriers. Rates do vary and this coverage is not an inconsequential expense. I recommend a veterinarian consider making application to at least three discrete insurance companies at the same time, in order to determine precisely what the coverage is going to cost. Keep in mind that an accurate premium quote cannot be determined without providing detailed health and historical information.

The easiest way probably is to use a multi-line agent and to make the applications at the same time. This way, the agent can provide quotes from various companies at one time. This will allow you to compare "apples to apples."

(For example, getting a quote from one company in 2007 when you were a smoker and from another in 2009 after you have quit is a waste of time.)

What coverage should you order? That depends on your wishes and the amount you have to spend on annual premiums. Do you want nursing-home-only coverage? Or do you want to be able to have in-home care by a nurse or attendant? Assisted living is another option.

Where do you expect to be when you might need the nursing-home care? The answer helps determine the level of coverage you need.

Do you want to reside in your hometown? Is it a big city or a rural community? Would you really prefer to go to a warmer climate? The daily rate of the nursing home you can realistically expect to use should be your guide to how much coverage to get.

(For example, MetLife will not even write a policy for New York City which carries a benefit of less than $100 per day.)

How much coverage you are looking for will affect the price.

In this regard, several decisions have to be made:

1. How many years of benefits?

Policies exist for limited periods, say up to seven years, or an unlimited period. Statistically, most nursing-home stays don't last for decades, but they certainly can. Your agent should tell you the cost of an unlimited term policy vs. a set number of years.

2. How much coverage for home care?

Do you want the full daily amount available for a home-care or assisted-living situation? If you want only a smaller percentage available for such care, the premium may be reduced.

3. How soon after admission to a nursing facility do you want coverage to start?

It is possible to save quite a bit on the premium if you elect for coverage to begin 20, 45 or even 100 days after entering the nursing home. The reason is that many nursing-home stays are short; they may be only a few days or weeks after surgery or they may end terminally. Therefore, if the insurer is not obligated to pay for the first few weeks or months, often they may not have to pay out anything even though a long-term policy is in force.

4. How do you want to deal with the inevitability of inflation?

It is cheaper to buy long-term-care insurance with a benefit amount that never changes.

However, if you buy now and are admitted to a home much later, your effective coverage could be eroded dramatically by inflation. For this reason, an automatic inflation-protection feature can be added, and I believe that such a rider is essential.

When should we begin researching coverage? The feeling among many trust and estate attorneys is that age 50 to 55 is an appropriate time to begin seeking coverage.

If there are highly heritable illnesses in your family, earlier tends to be better.

Coverage is much less expensive in our 50s than later.

Also, the longer we wait, the more likely it is that we will be diagnosed with a condition rendering us very costly to insure or, worse, uninsurable.

Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services to veterinarians. Call (607) 754-1510 or visit info@veterinarylaw.com