Long-term care insurance is complicated, expensive and not for everyone

Posted: Friday, June 28, 2002

NEW YORK (AP) -- If there's an insurance product requiring that you do your homework before you buy, it's coverage for long-term health care.

The policies currently available from three dozen different insurance companies vary greatly in the kinds of care they provide for, what disabilities trigger benefits, the amount they pay out and, perhaps most importantly, how much you have to pay to get the coverage.

Still, given that manyAmericans are expected to spend some time in a nursing home or require some other type of long-term care, it's coverage families need to consider.

Very wealthy families tend to forego long-term care insurance because they can afford to pay for care on their own, while poor families generally have such limited assets that they qualify for federal Medicaid assistance. That leaves the middle class as the prime market.

Benjamin Lipson, author of J.K. Lasser's ''Choosing the Right Long-Term Care Insurance,'' says there are some people who need it more than others.

''Single people who don't have anyone to care for them are candidates,'' he said. ''So are couples whose children live far away. And anyone who has a family history of dementia or other conditions that can cause long-term disabilities should consider it.''

Most people buy long-term care coverage when they are in their 50s or 60s. But because premiums are much higher when you're older, there are some agents who recommend you buy at a younger age to hold down annual costs.

Buying a policy at a younger age also would give you coverage if you developed a chronic illness or suffered a debilitating injury in mid-life, said Joyce Ruddock, vice president of the long-term care division at MetLife in Westport, Conn.

''If you look at who is in nursing homes, a large percentage are young adults hurt in motorcycle or car accidents,'' Ruddock said. ''Diseases like multiple sclerosis and Parkinson's can strike at a young age and require care.''

A good place to see what a policy might cost you is www.ltcfeds.com. It's the Web site created for the new long-term care insurance program being offered to federal government workers by Long-Term Care Partners, a joint venture between the John Hancock Life Insurance Co. and MetLife.

A policy with a $100 a day benefit for three years after a 90-day waiting period would cost $79.17 a month for a person age 56, but $40.72 a month for someone age 38, the site's calculator shows.

A shopper's guide also is available from the National Association of Insurance Commissioners, the organization of state insurance regulators. A copy of the guide can be obtained by calling the association's publications division at (816) 783-8300 or visiting the Web site at www.naic.org.

One of the biggest problems in selecting a policy is that each offers a variety of options, making them hard to compare. Financial planners and independent brokers can help.

Among the important things you must consider are:

-- What is covered?

Most policies cover not only nursing home care but also in-home care and assisted living. Some even include hospice care. You want to make sure it handles both physical ailments as well as cognitive impairment caused by dementia or Alzheimer's disease.

-- What triggers benefits?

Generally a person must be determined to be incapable of performing at least two ''activities of daily living,'' or ADLs. These include getting dressed, feeding yourself, taking a bath, going to the bathroom and moving from a bed to a chair.

-- Is the benefit adjusted for inflation?

With nursing home care costs rising, most experts recommend you consider an inflation guarantee.

-- How large is the daily benefit?

The daily benefit on most policies -- the maximum amount your policy will pay for each day of care you receive -- ranges from $40 to $250 a day.

Costs can vary greatly from state to state. A recent survey by MetLife found that the average cost of an assisted living facility in the United States was $2,159 a month or $25,908 a year. The highest monthly average was $3,696 in New York City, while the lowest was $592 in Jackson, Miss.

-- How long are the benefits paid?

Many people choose a three-year option, because that's historically been the average nursing home stay. But with people living longer, policies also offer options of five-year or even lifetime payouts.

-- What's the deductible?

The deductible, known as the elimination period, is the number of days of care you agree to pay out of your own pocket before your benefits kick in. Most people choose either 30 days or 90 days, but 60 days also is an option.

Most people buy individual policies, but a number of family options are coming on the market. Some, for example, give the surviving member of a couple access to the other's unused care benefits.

John Hancock of Boston recently introduced a ''family care'' policy that allows up to four family members to pool their coverage.

''When a couple is doing its own long-term planning, they can open the issue with parents,'' said Michelle Van Leer, a senior vice president. ''The cost is more attractive than buying four separate policies.''


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