When people age, every day tasks that used to cause no difficulty could become impossible to do without some assistance. Long term care insurance provides individuals with a weekly tax free benefit in the event that they would require assistance with 2 of the 6 activities of daily living. Those activities include bathing, dressing, eating, maintaining continence, toileting, and transferring. Except for family and friends that could take care of you, there is a number of facilities that were created to help, especially with these difficult situations: home-health services, adult day-care centers, assisted-living facilities, or nursing homes.
If such a situation arises, finding the right facility should not be a problem. But let's have a look at the costs: The problem is that the average price of a private room in a nursing home is $212 daily at the moment. The yearly cost is well over $70,000 and with the average length of time for current residents at nursing homes being about 2 and half years, coupled with inflation, only very few people are able to pay for these costs by themselves.
The long term care insurance policy is aimed to give you a chance to be prepared, if such a situation presents itself. Here's what you should look for if you decide to apply:
Consider your suitability: Is this policy for you? On the one hand, applying earlier than later means lower premium payments. For example, a 50 year-old may pay $2,000 for a policy, while a 70 year old could pay $8,000 or more. On the other hand, to begin paying at a relatively young age means you will pay for dozens of years, not knowing if you will actually use the policy.
Another thing to consider is your health and you need to find out if you are, in fact, eligible coverage. If you've been diagnosed with dementia, schizophrenia or if you use a wheelchair or a walker, hardly any insurer will cover you.
How to choose a company. When you have decided to apply for the insurance policy and you are quite sure that your condition doesn't prevent you from applying, the next step is to choose the right company. Possibly the best way to approach this is to cooperate with a trusted independent insurance broker that will provide you with unbiased independent advice. The broker should offer you insurance from a company with high financial-safety marks (at least B+). To check on-line, go to www.ambest.com, www.moodys.com, www.standardandpoors.com or www.weissratings.com. Whatever you do, take your time to compare your options. Make sure you understand the policies. If not, ask your broker to explain them to you.
Get the right policy. Things to consider when choosing long term care insurance policy:
- Look for a policy requiring that a person is not able to perform no more than two activities of daily living. One should be bathing. According to the U.S. Department of Health and Human Services 1999 National Nursing Home Survey, 94 % of nursing-home residents receive help with bathing. A good policy will cover care not only in nursing homes, but also in assisted-living facilities.
- Determine the elimination period and/or benefit period which best suit your needs and budget. The elimination period refers to the amount of time which must pass before you begin to receive your weekly benefit, and the benefit period refers to how long you'll receive that coverage for. Those 2 variables combined with your daily benefit will help determine your monthly premium.
- Does the policy have limitations on when and how you receive your benefits? Many of long term care policies will only payout if you require facility care assistance.
- Is there a premium cap on the policy? Most long term care policies in Canada offer guaranteed premiums for only the first 5 policy years.
- Investing in a long term care insurance policy is simply not enough without additional policies such as the "cost of living adjustment" and "return the premium" riders. The former allows the benefit to be raised according to inflation, whereas the return of premium benefit returns the paid premiums to your beneficiary in the event you pass away.