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Long-Term Care Insurance
No one, it seems, relishes the
idea of paying insurance premiums of any kind. Maybe that includes you.
After all, you can pay and pay and pay…and never collect. If you are
fortunate, that is.
The purpose of insurance is to transfer a risk
that you can afford (i.e. the payment of a premium with no guarantee of
its return) to cover a risk you cannot afford. For example, what
homeowner does not insure their personal residence from damage due to
fire? Or, what automobile owner does not insure their auto from damage
due to a collision?
Consider this: The odds of a major fire
insurance claim are one in 88, with an average claim of $2,000. And, the
odds of an auto insurance collision claim are one in 47, with an average
claim of $8,000. Against this backdrop, why would any
responsible seasoned citizens (i.e. over age 65) not insure against the
financial risk of requiring long-term care at some point? Consider this:
The odds are nearly one in two that a seasoned citizen will need
long-term care for about 2.5 years at an average cost of $57,000 per
year, with an average claim in excess of $100,000!
The
LTCI Alternative
Fortunately, an appropriate Long-Term Care
Insurance (LTCI) policy can be designed to fit almost any budget. Most
LTCI policies share some common features you should know, to include the
following:
• Benefit Amount: How much and how long will the policy pay?
• Benefit Triggers: When will the policy pay benefits?
• Inflation Protection: Will the purchasing power of the Benefit Amount increase?
• Level of Care: Are Custodial and Intermediate Care covered, along with Skilled Nursing Care? Is Home Health Care covered?
Caveat
Emptor!
That is Latin for Let
the Buyer Beware. With more
than 100 companies selling LTCI, this is an appropriate warning. When
shopping for an appropriate life insurance policy, remember that
financial strength is a key consideration. As with any form of
insurance, the policy is only as good as the ability of the insurance
company to pay your claim. Check out the financial strength and
reputation of the insurance company before you sign on the dotted line.
There are several established insurer rating
services, such as A.M. Best Company (www.ambest.com),
Fitch, Inc. (www.fitchratings.com),
Moody’s Investor Service, Inc. (www.moodys.com),
Standard & Poor’s Insurance Rating Services ((www.standardandpoors.com),
and Weiss Research, Inc. (www.weissratings.com).
Visit these services online or at your local
public library. Reputation also is important. Contact the Insurance
Commissioner for your state regarding an insurance company’s status
and any complaints from policyholders. Finally, contact the National
Association of Insurance Commissioners for a copy of the Life
Insurance Buyer’s Guide, by phone (816) 842-3600 or online at www.naic.org/1pubcat/consumer.htm.
Summary
The scope of the insurance options available to
your Long-Term Care protection extends well beyond this brief overview.
You should seek competent legal counsel to interpret the contractual
provisions of any LTCI policy before submitting an application for
coverage. It is always better to know in advance of the thunderstorm
whether your umbrella has holes in it.
This
publication does not constitute legal, accounting or other professional
advice. Although it is intended to be accurate, neither the publisher
nor any other party assumes liability for loss or damage due to reliance
on this material.
Copyright © 2004 by Integrity Marketing
Solutions. All rights reserved.
You may reproduce materials available at this site for your own personal use
and for non-commercial distribution. All copies must include this copyright
statement. Some artwork provided under license agreement.