INSURANCE – LONG-TERM CARE – UNDESIRABLE POLICY OPTIONS

Long-term care insurance can provide peace of mind to those who are concerned about how they will finance long-term care, if needed. It can also provide significant financial assistance to buyers. However, some policy terms can negate many of the benefits of coverage. It is critical that buyers of long-term care insurance understand what these terms are so they can spot them in policies they are considering.

Much like an automobile insurance policy, long-term care insurance requires customers to pay premiums and deductibles, although the latter is called an “elimination period” in long-term care policies. The first two undesirable options relate to these provisions. First, most policies provide for premiums to increase with age. Unfortunately, many seniors buying policies buy the best possible coverage they can afford at the time. Later, when premiums rise and they are on fixed incomes, they can no longer afford the premiums, resulting in termination of the policy and no coverage when needed.

Long-term care insurance often includes, as do health insurance policies, preexisting condition limitations. These clauses refuse to cover some or all conditions, typically for a period of six months after coverage begins. A clause imposing a preexisting waiting period for longer than six months is considered unusual and undesirable.

The third undesirable option is an unusually long elimination period. An elimination period is the period of time the insured must pay for the long-term care before the insurance coverage kicks in. In that way, it is much like an automobile insurance deductible. Some policies have 100-day elimination periods. In those cases, an insured placed in long-term care that is covered by the policy would have to pay the full cost of the first 100 days. After that, the insurance benefit would kick in. Obviously, the cost of policies with longer elimination periods typically exceeds those containing shorter elimination periods. For that reason, one considering long-term insurance must carefully consider how much care he or she can personally afford before coverage is available.

The fourth type of undesirable option in long-term care policies relates to conditions that must exist before coverage is triggered. Some policies will not pay for long-term care unless it follows a hospitalization of a certain length, such as three days. Others require skilled care to occur before certain types of long-term care will be covered. In either instance, those triggers must occur or the policy will not pay.

The final set of undesirable provisions relates to the actual benefits provided under long-term care policies. For example, some individuals who purchase long-term care policies without reading or understanding them later discover that the policies exclude coverage of intermediate care and custodial care, thus covering only traditional nursing home stays. Other policies exclude long-term home care entirely, and still others exclude it unless it is preceded by nursing home care. Insurance companies also frequently exclude conditions such as Alzheimer’s disease, rendering coverage unavailable to a fair segment of the population.

As one might expect, policies that contain provisions such as these often cost less than policies that do not. However, that is not necessarily the case. Only by educating themselves about potentially damaging policy provisions can consumers make well-informed decisions that balance the cost and coverage of long-term care insurance.