Don’t Sell It Short

If you’re a healthy adult in your 50s, it may be hard to think of yourself needing long-term care. But that’s just when you should be thinking about it, say long-term care insurance industry experts. The cost of long-term care insurance rises yearly as you grow older.

If you’re going to buy a policy to protect you against the devastating costs of care when you’re old and infirm, you can’t wait too long beyond your 50s, or you may no longer be able to afford the premiums.

Another reason not to wait is that the longer you do, the more likely you are to develop a condition precluding you from even qualifying for the insurance.

As an insurance layperson, I find it difficult to imagine many other forms of insurance more complex than long-term care insurance.

If when comparing ordinary insurance policies you need to ensure you’re comparing apples to apples, comparing two long-term care policies must be like contrasting pairs of each of the fruits in earth’s horn o’ plenty.

Let’s see, you need to master the meaning of such issues as covered services, daily benefit amount, benefit period, maximum lifetime benefit, waiting period (or elimination period), inflation protection options, benefit triggers, tax-qualified policies, premium rates, premium payment period and pooled benefits for couples, and choose the policy that best reflects your needs on each of those criteria. AND you have to do it 25 or 30 years before you’ll need the benefits.

See why you might want to start paying attention sooner rather than later?

Myth-buster

The whole topic of long-term care insurance is replete with all kinds of distortions, fallacies and myths. So says Jesse Slome, executive director of the Westlake Village, CA-based American Association for Long-Term Care Insurance (www.aaltci.org). “There are many misconceptions and so much misinformation, because most people simply dabble in this,” says Slome, whose organization is an advocate and educator not supported by insurance providers.

One of the most common myths about long-term care insurance is you don’t need it if your assets fall above or below certain thresholds. Some say, for instance, that you probably don’t need the insurance if you have assets north of $2 million. Maybe, but that doesn’t apply to all such individuals, Slome says.

“If you’re not going to spend it, and you’re going to make your wife your indentured servant, you should have long-term care insurance,” he says.

Another fallacy is that you can simply go out and buy a long-term care insurance policy if you have the money to do so. Wrong. Says Slome: “The fact Americans are not aware of is the need to medically qualify for these policies.”

Almost one quarter of folks in their 60s who apply are declined, and 45 percent of those in the 70s are given thumbs down upon applying, he adds.

Yet another myth, Slome says, is that because the benefits will be paid out so many years in the future, you have to be prescient about the future health of the insurance company you select. “No one can predict the future,” he says. “But people put too much stock in insurance company ratings.

“And long-term care insurance is only a small part of any insurance company’s ratings. A lot of banks go out of business, but insurance companies don’t fail. And even if they were to fail, the policy holder is protected. In every state, there are state-guaranteed funds, just like the FDIC. But insurance companies aren’t allowed to talk about it. Your policy has protections… The state would take it over; you may not be fully protected, but it’s not like you paid premiums all these years, and now they’re gone. It doesn’t happen that way.”

Still, a thoroughgoing comparison of carriers’ policies is important because the nuances can result in wide swings in costs from one to another. A policy that seems affordable may be one that doesn’t offer the protection you desire. Or it may be from an insurer that hasn’t re-priced its products in several years and is apt to levy a rate increase in the near future, Slome says.

Get a broker

Okay, I exaggerated a bit when I talked of having to master all those long-term care insurance terms. If you think you need to become a flat-out expert on that cornucopia of issues I mentioned earlier, please know that that too is a myth. You can’t buy long-term care insurance directly from insurers themselves; you need an intermediary, Slome says.

Insurance agents who represent only one company may have the best option for you or may not. For that reason, you’re best advised to speak to a broker who knows the business and offers policies from multiple insurers, generally in the neighborhood of three to 10 companies. He or she can provide a lot of the expertise you’d otherwise have to achieve.

Here’s one final thought. Life insurance companies are concerned about the likelihood of the insured dying. Long-term care insurers are concerned about the opposite, the chance the insured will go on living. In your 80s, the statistical chance you’ll need long-term care is between 50 and 75 percent, Slome says.

“If you think government benefits years from now will be better, you probably feel you don’t need long-term care insurance,” he adds. “But if you don’t think they’re going to be better, you better do some long-term planning.”