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A primer on long-term care insurance

by Shannon Lee

Choosing a long-term care insurance policy could be one of the most important decisions you ever make. Ensure you make the right choice by comparing all the options.

Thousands of people make the same mistake every year: they assume that Medicaid, Medicare, or private insurance will help pay for the costs of their long-term care. While these policies may cover some medical bills, long-term care is a different beast altogether, and health insurance plans might not protect you.

What is Long-Term Care Insurance?

When a person enters a long-term care facility, long-term care insurance is designed to provide the coverage they need. Long-term care insurance can protect personal assets and family inheritance while providing financial security and a greater choice of long-term care options.

Long-Term Care Insurance: How It Has Changed

Not long ago, long term care insurance was often priced out of range for those who needed it most, and the coverage was filled with loopholes that catered to the insurance companies. But the Health Insurance Reform Act of 1997 changed all that. Now, information on long-term care insurance is just as clear as that for health insurance, and individuals can take a deduction for premiums on their tax return. In addition, the insurance benefits received usually do not count as taxable income.

Despite the changes, long-term care insurance can still be tricky. It is a legal contract that is set up to provide coverage but to protect the insurance company as well. Therefore, being careful to choose the best policy is definitely worth the time.

Choosing a Long-Term Care Insurance Policy

Your decision on a long-term care insurance policy could be one of the most important choices you ever make. Here are a few pointers to keep in mind when comparing policies:

  • Choose a reputable company, one with a reputation of longevity. Check with insurance rating services to get an idea of overall satisfaction, and make certain the insurance company is licensed to provide long-term care policies in your state.
  • Review the policy itself. A brochure and marketing materials is not enough. The insurance agent should be happy to provide a sample policy for you to read over at your leisure.
  • Ask about the specific set of conditions that qualify you for coverage. Does the policy cover physical impairment? Cognitive impairment? Both?
  • Some policies have waiting times for pre-existing conditions. Make sure you know what that waiting period is, and how they determine what "pre-existing" means.
  •  How much does the policy pay per day, and for how many days? Look at the lifetime benefit cap and compare that to the cost of long-term care to help determine how much insurance you might need.
  • Make certain you understand every provision in the policy. Write down questions as you go through the paperwork. Discuss the policy with people you trust, including your physician. Speaking with an attorney might be a good idea, as well.

Long-Term Insurance: Take Your Time When Making a Decision

If an agent tries to pressure you into purchasing a particular policy, walk away. At best, the "pressure tactics" are unethical--at worst, they might be illegal. This is a decision that should not be taken lightly or rushed. The right policy can make the long-term care experience easier for everyone, so take your time in making this important decision on long-term care insurance.