by Michael Kling | September 16, 2014
When long-term care insurance first became available about eight years ago, there were few customers. The product was full of holes, untested, and overpriced. Not surprisingly people took a wait-and-see attitude, mainly because it took a while for most people to even become familiar with the need for this type of protection.
Fortunately, insurers have responded with significant product enhancements. But with so many policies to choose from, it has become more difficult to be sure that you’re selecting a policy that’s best for you. Because all policies are not the same, here are some issues to help you understand long-term care insurance options so you can obtain the coverage that best fits your needs.
What is the best way to calculate how much coverage you should buy?
It’s difficult to give a definite answer because each individual has a different comfort level with risk tolerance and how much of their income and assets they’re willing to spend to avoid risk. The amount of coverage depends in part on what you need and in part on what you can afford. Generally speaking, you should not spend more than 5 to 10 percent of your income on long-term care insurance premiums. In terms of the size of the daily benefit you purchase, it should make up in the shortfall between your income and the average cost of nursing home care in your area.
For how long a period should I insure myself?
Again, there is no one right answer for everyone. Most people buy what gives them peace of mind and is affordable. If you’re between the ages of 50 to 65, consider lifetime benefits with compound inflation options. If you’re 65 to 75, think about a six-year or lifetime benefit period with simple inflation options. Those older than 75 years old should consider buying more daily benefit for as long a period as they can afford.
Will the agent provide you with a sample policy?
Although sales literature can be helpful to give you a general overview of policies, it’s in your best interest to request a sample policy so that a family member, friend or adviser can review it with you before you buy. Be sure the sample policy matches the policy quoted by the agent; look for a policy series number.
Is the policy a group certificate type or an individual policy?
The difference between a group policy and an individual is significant even though the distinction may not be obvious. In some states, individual policies are regulated while group ones are not. Individual policies, however, are guaranteed renewable for life and premium increases for a class of insureds must be approved by the state.
This is a starting point for making an informed personal choice regarding long-term care insurance. We would be happy to consult with you to help assess and guide you regarding whether this insurance should be part of your overall estate planning. Please contact us at Kling Law Offices to discuss things further.