How do I compare long-term care policies?
Long-term Care Insurance
First of all, long-term care insurance is a world apart from products like term life and automobile insurance. Many factors contribute to a much more complicated picture. Among these are:
- the complexity in defining need for long-term care
- the patchwork private/public insurance landscape
- the high cost of private insurance
- the potential for significant future changes in premiums and benefits that go along with a relatively immature insurance market
- Inflation protection (5% compounded) is expensive but almost always worth it. Agents may push cheaper options, to make the policy appear more affordable, but chances are you'll end up with insufficient coverage or higher premiums over the long run.
- Look at how many activities of daily living (ADLs) the policy recognizes and how many you need help with to qualify for benefits. The more ADLs listed and the fewer required to get benefits, the better. Bathing is usually the easiest to qualify for, so be sure it's on the list.
- Nursing home costs vary widely by region of the country and private versus shared room. Be sure to check into rates in your community before picking a benefit level.
- Look seriously at four-year and six-year benefit terms, usually the two options of longest duration. Nursing home stays are much shorter than four years, on average, but you don't buy insurance to cover the average. If you can afford it, lifetime coverage is available.
- Make sure that the policy covers in-home care and assisted living facilities. Also, make sure that "assisted living" isn't so narrowly defined that it cuts out desirable options. Policy benefits may be reduced for care outside of a nursing home (because it's cheaper, on average), but you'll want these alternatives if around-the-clock care isn't required.
- Nobody is guaranteeing premiums yet (they could be raised across the board in the future), so be sure you could handle a 30% increase.
- Consider purchasing the Consumer Reports October 1997 report on long-term care insurance (your local library may have it), which features detailed background material and ratings of policies available at that time. The numbers are bound to have changed some, but the methods are still useful.