Long-term care insurance shopping tips

Shopping tips

• Consider your needs: Although it may be difficult, try to anticipate what services you might need in the future and choose a policy that’s right for you. Creating your plan prior to shopping will help you identify and better understand your needs.
• Shop around: Prices can vary substantially from one company to another, even for policies with similar benefits. Get quotes from several companies before buying a policy.
• Buy only from companies that are financially sound: A company’s financial rating by an independent rating service is a helpful indication of the company’s overall financial strength.
• Choose companies that have a good track record for customer service: The number of consumer complaints against a company is a good indication of the company’s customer service record. Your family and friends can be a great source of information about a company’s customer service, so be sure to ask them if they’ve had any experience with the companies you’re considering.
• Buy only from licensed companies: Licensed companies belong to a guaranty association that will pay your claim if your insurance company goes broke. If you buy from an unlicensed company and have a claim, it might go unpaid.
• Review and consider the company’s 10-year history of rate increases: While past increases are not a guarantee or predictor of future increases, you may want to take the rate history into consideration. The Texas Department of Insurance (TDI) has the rate increase histories of companies selling long-term care insurance.
• Buy from an agent you know and trust: If you buy insurance through the mail or by phone, ask whether the company has a local agent or a toll-free number you can call if you have questions.
• Try to find an agent that specializes in long-term care insurance: Because of the many variations in long-term care policies, having an agent with knowledge and experience can help you choose the right coverage for your needs.
• Use your "free look period:" Insurance companies must give you at least 30 days to look over your long-term care policy after you receive it. Read the policy carefully to be sure it has the benefits and features you want. If you decide to return the policy within the 30 days, you will get a full refund of any premium paid. It’s a good idea to use certified mail so you will have proof that you returned the policy. Be sure to keep a copy of everything you return.

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Questions to ask

What types of care are covered and in what setting?

Policies can offer a full range of services, including home health care, adult day care, assisted living facility care, and nursing home care. Policies are required to cover all levels of care from custodial to intermediate to skilled care.

What are the benefit eligibility requirements?

Policies won’t pay until you’ve satisfied certain requirements, such as being unable to perform tasks called activities of daily living or being certified as cognitively impaired. The benefit eligibility triggers may vary from policy to policy.

How much is the daily benefit amount for each type of benefit?

Most policies will pay a maximum daily amount for your care. You choose the maximum daily benefit when you purchase the policy. It’s important that you choose your benefit amount wisely. Keep in mind that you do not need to insure the full cost of care. To keep premiums down, you could plan to pay some of the cost yourself.

How long will benefits be paid?

The chances of needing long-term care for more than five years are relatively small. For most people, a policy covering three to five years is appropriate and more cost-effective. However, if you’re concerned about diseases requiring more care, such as Alzheimer’s, you may want to consider the more costly option of lifetime coverage.

Does the policy have a pre-existing condition waiting period? If so, how long is it?

Some policies won’t cover a pre-existing medical condition until after a certain period of time has elapsed but no longer than 6 months. Some policies will pay for care related to a pre-existing condition immediately if you disclosed the condition on your application. Make sure you know what the policy says about pre-existing conditions.

What inflation protection is offered?

Inflation protection helps ensure that you have adequate coverage in the future. All companies must offer an automatic increase in benefits at the rate of 5% compounded annually. If you reject inflation protection, the rejection must be in writing. The company may also have other options for inflation protection. Remember that to be prepared for inflation, you must pay a higher premium today or higher out-of-pocket costs later.

What is the nonforfeiture benefit?

All companies must offer you a nonforfeiture benefit. If you reject the nonforfeiture benefit, the rejection must be in writing. If you cancel or lapse your policy after a specified number of years, the insurance company will either return a percentage of the premiums you paid; extend benefits for a period of time equal to the premiums paid, less any claims; or provide a greatly reduced benefit.

Is the policy tax-qualified?

If you buy a tax-qualified policy, you can deduct part of the premiums you paid as a medical expense on your income taxes. Benefits paid from a tax-qualified policy are generally not considered taxable income. The policy must disclose if it is intended to be tax-qualified or non-tax-qualified.

Can I upgrade the policy later by purchasing more benefits?

Some companies allow you to upgrade your policy after purchase. However, you will likely have to complete and submit a new medical questionnaire.

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Protect yourself

• Review the application carefully: Read what you are asked to sign before you sign it. Never sign a blank application form.
• Ask questions: Ask all the questions you need. If an agent tries to rush you, be suspicious!
• Take notes: Take notes when you talk to an agent. The notes could help you later if there is a dispute over what you were told about a policy.
• Take your time: Don’t buy insurance on the agent’s first visit. Invite someone you trust to be present during the second visit. An agent shouldn’t object.
• Complete the application yourself: Answer all questions on the application accurately. Don’t let the agent fill it out for you. If an agent helps you complete the application, make sure the information is correct and complete before you sign. Omitting or falsifying information could cause the company to deny your claims or cancel your policy.
• Do not pay cash: Always pay by check or money order so you have a clear record of payment. Make checks payable only to the insurance company or insurance agency, not to an individual agent. Insist on a receipt signed by the agent on the company’s letterhead.
• Get the contact information: Be sure you have the names and addresses of the agent and the insurance company. Know how to contact the agent and the company if you need help.

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