Long-term care insurance, sometimes referred to as nursing home insurance, is a confusing product for most people. The misnomer, nursing home insurance, came from the original product that only paid for a stay in a nursing home. Normally, it only covered skilled care that took place in a nursing home. Today, the policies cover so much more and have the potential benefit of at-home care. You need to understand all the possibilities and pitfalls before you begin a long-term care insurance policy.
Types
Check the policy for the type of coverage you want. Most policies offer both at-home coverage and nursing-home coverage. If you select just one type of coverage, you often limit your options. Look for a policy that covers both. Often, policies cover at-home care at half the payment of nursing home policies. Some policies offer the ability to increase that coverage to a dollar for dollar amount.
Function
The function of long-term care policies is to provide coverage whether you need custodial, intermediate or skilled care. Skilled care involves medical care, whereas custodial care is care required for activities of daily living. These include eating, bathing, dressing, toileting, transferring and maintaining continence. Different companies define each of them somewhat differently. For instance, some companies consider the inability to create a meal without help or an inability to eat or provide for household services. Other companies consider the inability to lift a spoon to the mouth or the need for intravenous feeding as the requirement. Look for the most liberal definition.
Time Frame
When you select a long-term-care policy, you have the option of choosing how long you want coverage. Some offer lifetime coverage. Other policies are partnership policies with the state where you live. If you select one of these, you have to have specific coverage stated in your policy. If your stay extends beyond the policy coverage, the state pays for the nursing home without touching any of your assets.
Amount
The cost of a nursing home or at-home care varies from area to area. Large cities tend to have higher costs, as do the coastal areas. Check for the cost in your area. Long-term-care policies pay a specific amount per day. If you don't need that amount, often it extends the length of time for coverage.
COLA
Look for a cost of living increase in your policy. They normally increase in specific percentages--either compounded or simple. A simple increase might be 5 percent of the original amount each year added to the daily amount. A compounded amount multiplies the new amount each year by a percentage and adds it.
Considerations
Some policies offer the ability for you to select your caregiver and, as long as they have adequately training, it may even be a family member. There are also benefits in policies that include adult day care if you stay with a working family member. Other benefits include respite care when you live with a member of the family.
Warning
The need for the insurance often is years away from the onset of the policy. Some companies find that in an effort to secure business, they priced the policy too low for the demands at service time. These companies, if not strong, can't pay the bills or have to dramatically increase the premium. Purchase your long-term care insurance from a financially sound company with experience in the product. Getting the policy with the cheapest price is not always a savings.
