If you decide to purchase long-term-care insurance, be sure to buy from an established insurance company. Certainly a very familiar company name is a good sign, but also check the company’s financial strength. The best insurance companies earn grades of AAA or AA from Standard & Poor’s. Long-term-care coverage should include…
Long exclusion period. To reduce the cost of coverage, select a policy with a 90-day to six-month “exclusion period.” This means that if you ever need care, you would have to pay out of pocket for this period before the benefits begin. Your premiums would be as much as one-third lower than with a 30-day exclusion period, the most common exclusion option.
Inflation protection. This protection is best when it is linked to increases in the actual cost of living, not to an arbitrary preset inflation rate.
Premium protection. Select a policy that does not allow your insurance company to raise your premium unless it also raises the premium for everyone holding the same policy. Insurance companies must apply to state regulators for this type of premium raise, making excessive increases less likely (though still possible).
Payout flexibility. Your policy should pay for home care, assisted-living care and nursing home care.
Minimal impairment to trigger coverage. A good policy will offer benefits when you cannot perform two or three daily living tasks, while a poor one might require that you cannot perform four or five such tasks.
At least three years of coverage. An extended stay in a facility is unlikely, but the purpose of insurance is to protect against unlikely but financially crippling scenarios.
