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Personal Financial Planning
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 If
you pay for a long-term care policy, you expect that policy to pay for
your care, should you ever need it. Long-term care insurance is a large
purchase that could cost thousands of dollars over your lifetime. It’s
worth taking the time to research your options.
Some long-term care policies cover a wide range of expenses, while others
require you to be almost totally disabled to qualify for benefits. And
sometimes two policies with identical features carry different prices,
so it’s important to compare several different ones.
Above all, always read the actual policy. No matter what the sales material
or the agent says, if a specific type of care is not spelled out in the
policy, it’s not covered. For example, a policy that requires prior
hospitalization or only covers physical disability may not cover long-term
care costs for a chronic, debilitating loss of mental functions, such
as occurs with Alzheimer’s. An attorney can help you review what
the policy does and does not cover.
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 WHAT
TO LOOK FOR
When reading over the policy, ask the following questions:
What’s the waiting period before benefits begin?
Does the policy cover nursing home care, respite care, and care
for the terminally ill?
Are there restrictions on prior conditions?
Does the policy require that you be hospitalized before you begin
receiving benefits? Many people who suffer from chronic conditions
are not hospitalized before they require long-term care.
Is there inflation protection?
Is there a waiver of premium? Without it, you’ll have
to pay premiums even when you’re collecting benefits.
Is there a non-forfeiture clause? This clause ensures that
you’ll get partial coverage or some money back if you let the
policy lapse.
How often are policies revoked after they are issued? If there’s
a pattern, it may mean the company tends to raise premiums, forcing
older policyholders out before they collect benefits.
Is the insurance company financially stable? Will the company be
around to pay benefits when you need them?
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GUARD AGAINST INFLATION
Long-term care costs are rising faster than most costs. To keep up, many
policies offer some form of inflation protection.
Simple inflation protection will raise the benefit a certain amount —
generally 5% — of the original benefit every year. Most experts consider
this type of policy least likely to keep pace with actual costs.
Compounded inflation protection will raise the benefit by a certain percentage,
also usually 5%, of the benefit from the previous year. Most experts recommend
you look for at least compounded inflation protection when shopping for
a policy.
Indexed inflation protection increases benefits according to an actual
measurement of inflation each year: the Consumer Price Index (CPI), for
example. While some experts believe these policies are most likely to
reflect actual cost increases, others caution that long-term care costs
have risen faster than others in the last few years.
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CHANGED YOUR MIND?
Check with your state to find out how long the free-look period is. The
free-look period gives you time to decide whether you want to keep a policy
that you’ve purchased. If you cancel within the free-look period,
you’ll get a refund.
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 THEY
MAKE THE CALL
The most generous long-term care policies pay benefits for services
your doctor deems necessary. But many policies leave that determination
up to the insurance company, usually through a list of activities
for daily living, known as ADLs. These generally include bathing,
dressing, eating, walking, moving from bed to chair, and using the
toilet.
Help with just two ADLs could be a substantial cost. So if a policy
specifies three or more assisted ADLs before benefits kick in, you
may want to look for a more flexible policy.
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