While there are many comparable long-term care insurance products available today not all products are equal. Before you buy a long-term care policy be sure you have carefully considered what you want out of a long-term care insurance product. Then, make sure the policy you select will provide the benefits you need if and when you need to use the policy's benefits. Most importantly, make sure that you work with an insurance company you trust and an agent who understands long-term care insurance.
It is very important to consider a company's financial strength ratings and rate increase history when selecting a carrier for a long-term care insurance policy. A long-term care insurance policy is a long-term investment and buyers should be confident that their carrier will be there in the future if they need them. New York Life Insurance Company consistently receives among the highest financial strength ratings from the major ratings agencies and while we retain the right to raise rates on a class of business, we have never had a long-term care insurance policy rate increase. The financial strength ratings refer only to the overall financial status of the company and is not a recommendation of the specific policy, provision, rates or practices of the insurance company. The following agencies provide financial strength ratings of the major long-term care insurance companies: A.M Best (A++), Fitch Ratings (AAA), Moody's (Aaa), and Standard and Poor's (AA+).*
* Source: 2001 Third Party Ratings Reports as of 11/1/01).
Long-term care insurance policies vary in scope and benefits. The following list captures some of the key aspects of long-term care insurance you should keep in mind when selecting a long-term care insurance policy. This list is not meant to be a comprehensive policy review guide. You should consult with your agent before selecting a long-term care insurance policy.
Waiting Period/Elimination Period
Be sure to review a policy's Waiting Period (also known as Elimination Period) options. Waiting Periods are sort of like a long-term care insurance policy deductible. The Waiting Period is the period that one must pay for their own care before the insurance company begins paying policy benefits. Waiting Periods range in length from a few days to one year.
How many days would you be comfortable paying for your care services before your insurance company began paying policy benefits? Make sure the policy you select offers a Waiting Period that fits your needs. One can save money on premiums by selecting a longer Waiting Period. However, be sure to consider the current and projected costs of long-term care services in your area. Waiting Period options vary by company.
Only you and your insurance agent can determine what the right Waiting Period is for you, but remember that the Waiting Period can have a big impact on how much you spend out-of-pocket for care before your long-term care insurance policy begins to pay benefits.
Maximum Daily Benefit
The Maximum Daily Benefit is the maximum amount that an insurance company will pay per day during a long-term care insurance claim period. Make sure that you select a daily benefit amount that is equal to the current daily cost for long-term care.
When considering the Maximum Daily Benefit remember that long-term care costs, like any other goods and services, tend to increase over time. To account for this increase you should consider adding a benefit increase rider to your policy that will enable your daily benefit to increase over time to help keep up with the increasing cost of care.
One should always consider purchasing a benefit increase rider, especially if one does not expect to utilize the policy benefits until years in the future.
Maximum Benefit Period
The Maximum Benefit Period is the maximum amount of time, usually measured in years that an insurance company will pay benefits to a long-term care policyholder. If you have a policy that has a maximum benefit period of two years, but in the future you need three years of long-term care services, you will not be covered for your third year of care. Be sure that you understand what the Maximum Benefit Period is for any long-term care policy that you consider.
Benefit Increase Riders
Long-term care insurance, like life insurance, is much less expensive if it is purchased long before it may need to be used. In the case of long-term care insurance, one can purchase coverage much less expensively if the policy is bought while the insured is younger. Younger candidates who are reasonably healthy are also more likely to be insured.
Because it is not uncommon for an individual to purchase a policy twenty to thirty years before they expect to use their benefits, long-term care insurance companies usually provide clients the option to purchase a contract rider, or amendment that will enable benefits to increase over the life of the policy. The reason for this is simple. Prices for goods and services tend to increase.
It is very likely that a policy purchased when an individual is age 40 will not be used until such individual is at least 60. During that period, the cost of long-term care may significantly increase due to inflation. The average daily long-term care costs at the time the policy was purchased at age 40 may cover only a portion of the daily long-term care costs when the insured is age 60 if the policy does not include a rider that will allow the maximum daily benefits and maximum lifetime benefits to increase in order to keep up with inflation.
Optional benefit increase riders typically offer to raise a policyholder's benefits on an annual basis using simple or compound interest scenarios. Most companies offer consumers simple interest riders and/or compound interest riders.
New York Life Insurance Company also exclusively offers a Consumer Price Index-Urban (CPI-U) Rider that is based on the annual Consumer Price Index. This rider gives New York Life clients the opportunity to raise their maximum daily benefit amount, on an annual basis, by the same percentage increase in the consumer price index for that same year. This provides a cost-effective way for consumers to decide on an annual basis how much they need to increase their benefits. (Please note: the CPI-U Benefit Increase Option is not available in all states at this time.)
Benefit Increase Riders can be the difference between a policy that performs very well when and if care is needed, and a policy that falls short. Be sure to carefully consider your options for increasing your benefit levels when selecting a policy.
A Care Coordinator can be a huge help when a need for long-term care services arises. A Care Coordinator is a trained, medical professional provided by the insurance company when insured goes on claim.
The Care Coordinator works with the insured and the insured's family to create a plan of care. If the insured is able to receive care at home, the care coordinator helps the insured obtain the care providers and medical equipment that the individual needs. The Care Coordinator will also help to develop an overall plan of care.
Conversely, if the insured needs to spend some time in a nursing home, or an assisted living facility, the Care Coordinator can help develop a plan for the insured's transition into the facility, as well as the care services the insured needs.
Be sure that you understand what types of care the policy you select covers. Most people today want to be covered for in-home care, allowing them to "age in place." As a result many long-term care insurance policies, including New York Life's policies, offer coverage for in-home care, in addition to nursing home care and assisted living. Some policies, including New York Life's LTCSelect Premier (not available in all states), will even pay benefits for care provided by friends and family under certain conditions. Policies that provide benefits for all of the types of long-term care you might need will give you the most peace of mind and the most options if and when you should need to use your policy's benefits.
In some states, insurance companies are permitted to offer premium discounts when spouses buy separate long-term care insurance policies at the same time. Discounts can also be provided in multi-life cases. Be sure that you check to determine if Premium Discounts are available in your state.
Please note: This Web site is for informational purposes only and is not intended to be a binding contract. You should contact your professional advisors for legal, tax or accounting advice. Long-term care insurance policies vary in coverage and benefits and can vary by state. Be sure that you clearly understand what is covered under any policy you consider.
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