Do you want to know more about long-term care insurance? If so, you are in luck. We interviewed 23-year industry veteran Allen Hamm, to ask him your most pressing questions. Here are his answers:
What should I consider when purchasing a long-term care policy?
Allen: Planning for long-term care requires a customized approach for each individual. First, consider your family history. Does longevity (living past age 85) run in your family? Have family members with dementia? If the answer to either of these questions is “yes”, your odds of needing long term care are likely higher, and you may be. more likely to benefit from having a long-term care insurance policy. Another issue to consider is your health. If you’re in poor health, premiums for long-term care insurance may be very high. But if you’re in really good health, they may be more affordable.
If you’re married, consider whether you will buy policies for both spouses or just one. Married couples get substantial discounts when purchasing policies for both spouses. Flexibility is important. Your policy should pay for care in your home, in an assisted living facility, or in a nursing home. Protection from the increasing cost of care is important too. You’ll want coverage that includes an inflation protection feature- where the benefits automatically increase each year.
When does it make sense for me to self-insure my long-term care needs?
Allen: Self-insuring means paying for long-term care needs from your own assets. This can make if you have enough money to reach your financial objectives and still pay for a potential need for long-term care.
Determining whether you can afford to self-insure requires some analysis. If funding an extended period of long-term care from your own assets would put you at risk of running out of money, I would strongly recommend co-insuring. This is a strategy where you utilize both your assets and long-term care insurance to cover your future care needs. For example, lets say Alzheimer’s disease is prevalent in your family. We might suggest that you be prepared to need memory care for 8 years (the average duration of Alzheimer’s care.) At a cost of $7500 per month, the potential cost for eight years of memory care would be $720,000. Co-insuring for that potential cost could involve setting $360,000 of your assets aside and buying long-term care insurance for the other $360,000.
How has the long-term care industry evolved over the last 5 years?
Allen: Long-term care insurance has been around for almost 30 years. But in recent years, claims have increased dramatically. People are living longer and needing care more frequently than anticipated, and so insurance companies are being more careful about who they insure. Policies are more difficult to obtain, and premiums have risen dramatically. For example, a 55-year old purchasing coverage today will pay about 40% more than what they would have paid 5 years ago.
What are some of the key laws related to LTC that we should be aware of?
Allen: Consumer rights were strengthened by several key pieces of legislation. In 2003, California passed legislation allowing policy owners to hire in home care providers on their own, rather than being required to go through a Home Health Care Agency. With this, policy owners have more choices and can also extend the policy benefits longer.
Another significant legislative change requires home care benefits to be based on weekly benefit payments rather than daily benefit payments. This is significant because a person may need very little care one day, but a lot of care the next day. For example, if you have a $1,000 weekly benefit and you hire a caregiver that charges $25 per hour, you will have 40 hours of care available to you each week even if the caregiver comes for eight hours on some days and only two on, other days.
What are the most common issues I should be prepared for when filing a claim?
Allen: The long-term care insurance claim process can be complicated. It’s very important to have an advocate at claims time. I help clients understand the policy and claim process, gather all the proper paperwork and work with the insurance company to move the claim along.
Most long-term care policies have an elimination period, where care costs have to happen for a certain number of days before benefits can start. Some insurers count those days as “calendar days” and others only count the days that you pay for care. It’s best to file the claim prior to paying for care so you know that the insurance company will count the care provided by the facility or caregiver you choose. Many policies have no or limited coverage for personal care services such as meal preparation and cleaning.
To start collecting benefits, you must meet the policy’s criteria for eligibility. This typically means you are either “cognitively impaired” or unable to perform at least two out of the six activities of daily living: bathing, continence, dressing, eating, toileting and transferring (getting in and out of a bed or chair). Many insurance companies require a physician’s report. You may want to ask the insurance company what type of information they need in the report so your physician only has to write it up once.
Once the claim is approved, it’s important to optimize the benefits. A very strategic approach needs to be taken about where the care is received, how to make the policy benefits last as long as possible, and how to make sure the policy owner is receiving the best care possible.
We Can Help
Allen Hamm is the founder of Superior Long Term Care, and Blankinship & Foster retains his firm to assist our clients with developing a long-term care plan, auditing their existing coverage and navigating the claims process. To learn more about how we help you plan for life’s expected and unexpected events, please Contact us today.