Choosing and Purchasing Your Long Term Care Insurance Policy
In our previous “Step-By-Step” article, we discussed the early stages of acquiring long-term care insurance, including the best age to start shopping for a policy and some important considerations to make regarding costs and budgeting. Once you have decided to purchase an LTC insurance policy, you should begin the process of researching and comparing policies and the companies that offer them.
1. Researching Insurance Carriers
Most people purchase long-term care insurance as an individual plan through an insurance agent or broker. However, you may also be able to buy a plan through an employer or a professional or service organization for a group rate. More detailed information on these types of plans and the various places you can purchase a policy can be found in our article “Where to Purchase Long-Term Care Insurance”.
Once you have determined that a long-term care insurance plan is right for you, contact your state insurance department and ask for a list of companies approved to sell LTC insurance there. Once you have your list, start doing some research on these companies and the policies they offer. While it may be time-consuming, this research is crucial. In a 2016 price comparison, the American Association for Long-Term Care Insurance found that rates could vary as much as 94% between different insurers. This is due in part to different companies structuring things in different ways – for example, the company selling the best rate for someone buying LTC insurance at age 55 may not have good rates for someone buying at 65, and so on.
You should also take some time to examine the insurance companies themselves, checking their history in the LTC insurance market on websites such as Moody’s Investors Service, A.M. Best, and Standard and Poor’s. Things to research include the financial strength and stability of the company (an important factor in assessing the company’s ability to pay out claims later on), how long they have been in the LTC insurance business, and how often they have increased their premiums in the past.
After doing this research on the companies themselves, choose the three that look best to you and compare costs, features, and other information about the plans they offer. Obtain a written copy of all of the policies that you are considering and review them carefully. If possible, do this with the assistance of your lawyer or financial adviser, who may be able to spot things you missed or provide other valuable insight. Don’t allow yourself to be pushed in a specific direction or rushed into making a decision, and if you have any questions, don’t be afraid to write to the company and ask them.
2. Choosing Your Policy
When comparing policies, focus not just on cost but on what each one has to offer. Long-term care insurance policies can come with many different features and levels of coverage, giving you plenty of options and allowing you to choose the policy that best suits your needs and budget. Below is a list of important factors you will need to take into consideration when selecting a policy.
Amount of Coverage: You get to decide what level of coverage you want, though most policies will put a cap on the amount that can be paid per day as well as the total amount that you will be able to receive in your lifetime. You can also decide what kinds of services you want to be covered by your plan and which ones you think you can do without.
Frequency of Payments: Most companies will allow you choose whether you pay premiums annually, semi-annually, quarterly, or monthly. Just be aware that while this flexibility can be great, you may be charged an additional amount if you opt for the more frequent payment options.
Duration: You also get to decide how long you want your policy to last. Long-term care insurance plans will often cover periods of two to five years, with three years being the most common, but in rare cases a policy may continue to pay benefits for as long as you live. If you want long-term care insurance but are worried about price, cutting back the plan’s duration, while risky, can be an effective way of increasing affordability.
Elimination Periods: The elimination period is the time between the point when you become qualified to receive benefits and the point where your plan actually begins to pay out. The exact length of the elimination period varies from policy to policy, with shorter elimination periods generally costing more than longer ones. Elimination periods of 30, 60, or 90 days are common, though sometimes they can be as short as 0 days. Before buying a policy, calculate how many days you can afford to pay for things on out-of-pocket before you need your coverage to kick in. If you think you will need coverage right away, you might want to opt for a shorter elimination period, but if you think that you will be able to manage without benefits for a while, you can save a bit of money on your premiums by opting for a longer elimination period.
Optional Extras, Riders, and More: A wide range of features and riders may be included in or added to a policy. For example, some policies will let you stop paying premiums after you have started receiving benefits. Sometimes this takes effect immediately, and sometimes it only goes into effect after a certain number of days. This is a great option and is definitely something to look out for in any policies that you are considering. To learn more about the different kinds of features that are available for long-term care insurance policies, see our article “Notable Riders, Options, and Features for LTC Insurance Plans”. There are also other important restrictions and distinctions between plans that you should be aware of, such as the difference between tax-qualified and non-tax-qualified plans, that you can learn more about in our “Things to Look Out for When Choosing a Policy” article.
3. Purchasing Your Policy
Once you have decided on a company and a policy, it is time to make your purchase. Most insurance companies will conduct an informal review to make sure that you are eligible to receive a policy. You’ll need to fill out an application and answer some health-related questions. The insurer that you are working with may also ask to see medical records or interview you in person or over the phone. While this may sound a bit nerve-wracking, it’s generally a good thing. Even if you do end up being turned down, it isn’t the end of the world, since competing companies may ask if you have been turned down for coverage before.
Finally, if you purchase a policy and then have second thoughts or uncover new information that causes you to change your mind, don’t panic. In most cases you have 30 days to review the policy after you’ve signed, during which you can choose to return your policy for a full refund.
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Making Claims & Using Your Policy