Coverage Options for Long-Term Care Insurance Policies, Pt. 2
This is the second and final part of a series. Read part one here.
It is also important to consider which expenses qualify for benefits. As I’ve mentioned before, early policies only supported skilled nursing home care after a qualifying hospital stay. New policies are less restrictive, but standards may vary between companies.
Issues you will need to consider are whether a policy covers home care, assisted living, or nursing homes. Additionally, do expenses for adult day care or other respite care qualify? The ability to receive care at home is important, as otherwise it may be necessary to move out of the home to qualify for benefits from the insurance policy. Home care and respite care benefits also help to provide relief for family members who are also serving as caregivers, making it possible to delay nursing home entry for a longer period of time. Having more comprehensive coverage is important to maintain flexible options for.
In terms of what qualifies for benefit coverage, the standard has become that you need to either be unable to perform two of six standard Activities of Daily Living (ADLs), or be cognitively impaired, as determined by a qualified physician. But qualifications may differ between companies and policies, so it is important to consider this issue carefully.
For example, a policy requiring two ADL limitations to qualify for benefits is of little value if bathing is missing from the list, as that is often the first ADL requiring help. Also, bathing could be defined in different ways, such as being able to get into a bathtub or being able to conduct a sponge bath. Standard definitions or fixed lists of ADLs do not exist, so you must be careful when comparing different policies. It is also important to make sure that cognitive impairment is a qualifying condition, especially if an impaired individual can still perform ADLs.
Option for pooled benefits for a couple
It can be cheaper for spouses to buy a joint policy than for each spouse to buy a separate policy. For example, the premiums for six years of benefits to be jointly shared will be cheaper than two separate policies each with three years of benefits. The lowered premiums can be attributed to an increased chance that claims will be less because one spouse cares for the other, and because of the reduced probability that both spouses will experience conditions which qualify for expensive long-term care benefit payouts.
Another consideration is the degree of underwriting and the classification provided for insurance premiums. It is worthwhile to shop among different companies, because they may arrive at competing conclusions about appropriate premiums based on their underwriting. Those in good health will likely benefit from more stringent underwriting. Everything else being the same, those in poorer health would prefer a less rigorous underwriting process.
Hybrid policies generally have fewer underwriting requirements, as a questionnaire and telephone interview may be sufficient without needing an additional medical examination. A hybrid policy may be the only insurance option for those with health conditions which may otherwise prevent them from qualifying for a traditional insurance policy.
A few other considerations for comparing different policies include issues such as secondary benefits. Does the policy have liquidity or death benefit options for unused coverage? How frequently are premiums paid? Is there is a one-time premium option? Can premiums be increased in the future? Is there a waiver of premiums once benefits begin? Does the policy pay any dividends?
One must also think about the viability of the insurer to pay claims, as determined through credit rating, past involvement with the long-term care industry, and past experience with claims payouts and customer complaints. Insurers offering the lowest rates to obtain more business may ultimately incur the highest rates after making adjustments to ensure their claims-paying ability.
Finally, the lack of standardization among long-term care insurance policies means that you have to be careful about the specifics for each individual contract under consideration. It is surely worthwhile to have a qualified elder law attorney study the contract for any potential issues or misunderstandings.