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What to look for in a long term care insurance policy

Utilizing an insurance product to offset the risk or a portion of the risk is best suited for most Americans today.  An insurance policy gives you leverage and eliminates most of the variables that are out of your control.

A summary of benefits are as follows:

  1. Leverage - A consumer can pay one premium for a LTC policy and qualify for the maximum benefit immediately (after the client chosen elimination period).  This removes the extended time horizon individuals or couples need to accumulate funds.

  1. Guarantees - An insurance policy removes investment risks.   Your benefits are guaranteed as long as premiums are paid.

  1. Asset Preservation – Little or no depletion of your estate for surviving spouse and heirs

  1. Control – As a policy holder/beneficiary you have control over the premium and monthly benefit.  You have control over the type of care you receive (in home vs facility).  You control the quality of care and choice of facility.

While navigating the decision of what company is best suited for you, it is best to start with reviewing a company’s credential on Weiss Ratings.  Weiss Ratings is one of the most stringent rating agencies in the world.  They rank approximately 850 companies each year that do business in the Life Insurance, Long Term Care Insurance and Annuity landscape.  Each year, approximately 6 companies achieve an A+ rating.  

Additionally, a long term care policy should offer the following features or endorsement choices:

  1. Elimination of inflation risk via a rider.   This protects against rising healthcare costs by passing that risk to the insurance company.  There should be options for both simple and compound inflation riders.

  1. Married couples can share benefits.  For example, each spouse can purchase a policy with a four-year benefit creating a pool of eight years of benefit.  This pool can be split between the two individuals as deemed necessary.  Thus, offering fully controlled flexibility for the insureds.  

  1. Many companies have a “use it or lose it” policy.  This means that if you purchase a $6,000/month benefit but only incur $4,200 worth of expenses in a month, you would forfeit the $1,800 that you paid premiums for.  This commonly occurs during the early phases of LTC needs when clients only need care for a few days a month.  Reputable companies will allow you to use the pool of funds as needed on a daily bases and will not force you to lose portions of a “monthly benefit”.