How to Evaluate Long-Term Care Insurance

Long-term care insurance is there to pay for long-term custodial care for chronic conditions. Where medical insurance, including Medicare, primarily pays hospitalization and physician costs, and disability insurance replaces lost income, long-term care insurance covers such items as home care and supervision for Alzheimer's patients, skilled nursing home care, adult day care, assisted living facilities and even hospice care. Because the cost of a skilled nursing facility can cost over $70,000 per year, a long stay in a nursing home can drive a family to destitution. Long-term care insurance, then, is an important part of an overall financial portfolio.

Instructions

• 1

  Compare qualification criteria. Most plans allow the insured to qualify for benefits if they lose the ability to perform two or more activities of daily living, which are eating, bathing, dressing, toileting, transferring and maintaining continence.

  Some plans cover cognitive disorders such as dementia, even where ADLs are maintained, while others exclude it. This could be a vital distinction.

• 2

  Compare covered services. Some plans provide more generous benefits for home care than others, for example, while other plans cover only nursing home expenses.

• 3

  Compare inflation protection features. Some companies offer benefits that will increase payable benefits along with the Consumer Price Index. Other companies allow you the option to purchase additional coverage to keep up with inflation, without providing evidence of insurability.

• 4

  Compare maximum daily benefits. This is the maximum amount payable for a day in a nursing home or other qualifying facility. The average daily stay in a skilled nursing facility costs $219, according to the U.S. Department of Health and Human Services.

• 5

  Compare exclusionary periods. This is the number of days that will elapse from the time the insured qualifies as needing long term care to the time benefits become payable. Keep in mind that Medicare only covers 100 days of nursing home care, and then only covers it immediately after a qualifying hospital stay of three days or more.

• 6

  Compare benefits and riders available for spouses. For example, some companies provide a spousal discount, or a reserve of funds available for either spouse when both spouses are insured.

• 7

  Compare the history of premium rate increases. Long-term care companies occasionally raise rates on in-force policy holders in order to maintain solvency. Stronger companies have been able to resist the need to raise rates on in-force policies, however.

• 8

  Compare premiums. Long-term care insurance does little good if you must lapse the policy because you cannot afford the premiums.