Long-term care insurance: policy choices and elections

When I wrote the first half of this article a few months ago, I had no idea how much interest and how many inquiries I would receive on the subject of so-called "policies." Consequently, I thought I would put together the final piece sooner rather than later. I will admit that the subject is a bit complex, and may not be the most enthralling topic in the world. Nonetheless, it is an important one for veterinary practitioners who are concerned about their estates, their surviving relatives and the quality of care they hope to receive as seniors.

Top 5 ways to save on long-term care insurance

As I explained in the first article, quality long-term care insurers are fairly similar in the terms of the coverage they offer and the rates they charge. The policies available, however, are all over the map. Selection of a policy is critical, and it is especially important to make the right choice the first time.

If your decision-making in your initial selection of a company or coverage is poor, you may be forced to switch into another policy when you are far older and the rates have jumped. Worse, you may not be able to switch; you since may have become uninsurable.

As in any business or profession, there is a great deal of variation in the quality and knowledge of insurance representatives. For long-term care insurance, it is vital to employ the help of an experienced broker who represents more than one line of insurance, and multiple carriers.

There are various coverage bells and whistles available in some policies, which are limited or not available with others. It is best to enlist help from someone who knows the range of options. Remember that this insurance is not cheap; you want only the coverage you need, while not missing out on the amenities you need.

Get help with application

A good insurance agent who represents multiple lines and carriers may well be able to streamline the application process. This is more important than it may seem if one has never tried to obtain this type of coverage.

While long-term care coverage is profitable for insurance companies and they do want to write such policies, it is only profitable because they are so careful in selecting who they will and will not insure. Therefore the applications are long and fairly difficult to understand.

Questions often tax the memory as to the dates and locations of prior medical care and surgical procedures. And beware: Don't try to slide by with uncertain information or outright falsehoods. These companies have no hesitation in declining or disclaiming coverage based on having spotted a lie or oversight in the application if there is any wiggle room to do so. Prior-occurrence risk evaluation is at the heart of the underwriting process, and these companies are good at it.

Also, a good insurance agent may be able to have you make one complete application to one reputable long-term care insurer, and arrange for all of the medical and some other information to be shared by competing companies.

Unlike auto and life insurance, long-term care insurance often requires payment of a deposit with the application. This may be so even if the company has not yet provided you with a premium quote or a commitment. Your agent may assist you by making a full application with deposit to one carrier and, based on that, get quotes for similar coverage from a few others.

Decisions, decisions

Remember the days when you could order a car that didn't already come with every conceivable option? That is how long-term care insurance is ordered. There is standard and there is deluxe. There is an upcharge for delivery in certain states. You have a zillion options but, as with that new Dodge, each choice affects the price. Let's have a look at some of the options:

» DAILY BENEFIT AMOUNT. This is the number of dollars the coverage will apply to the care you may eventually need. You need to try to figure out how much your nursing-home care would cost in the region where you most likely will be needing it. My personal policy covers me for $250 per day in 2008 dollars because I live in upstate New York. If I intended to retire to Wyoming and get any needed care there, I might not need a daily benefit amount that high. A nursing home in Maui? Well, you get the idea.

» PREMIUM PAYMENT OPTION. As with life insurance, you have options as to whether you want your policy to be paid up at the end of a specific period, (say 10 or 20 years), or whether you want the premiums to be due until your death. If you select a finite premium payment period, the annual cost may be higher. However, once the last payment is made, the coverage cannot ever lapse.

» INFLATION PROTECTION OPTION. You want this. There is no way to predict the rate or impact of inflation on your chosen daily benefit amount. Nonetheless, you know with certainty that a fixed benefit amount will not buy as much nursing-home care in the future as it would now. An inflation protection rider adjusts the benefit upward with inflation to protect against deterioration of the value of coverage. Another sub-decision in this area is whether you want the inflation adjustment to be simple or compound. Compound is more realistic, in my view.

» FAMILY CAREGIVER RIDER. Long-term care policies may offer language allowing compensation to an immediate family member for care provided to the insured (which would otherwise need to be provided by a facility or professional caregiver). For example, if a child or spouse lives near or with an elderly person and decides to provide care to that relative on a regular basis, this rider will pay them to do so. This is not generally available without additional cost. The rider is not particularly expensive, and if the understanding between two spouses is that one would care for the other for a while at home if the need arose, then the "paycheck" would help compensate for efforts that would have likely been provided by that spouse anyway. Just something to consider.

Nursing facility, home care or both?

Some long-term care policies cover care provided only at an approved nursing home or other care facility. Others allow for the full benefit amount to be applied to skilled nursing care in the insured's home. As with any other policy option, more coverage means more expensive premiums.

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