LTC Insurance: Tips for Shoppers

Do Your Homework

Long term care insurance has changed a lot since it started 30 years ago. Policies today will mostly cover the full range of long term care options: In home, assisted living facility, nursing home, adult day care, etc.

But policies are contracts and can have many built in bells and whistles as well as exclusions or caveats. So DO YOUR HOMEWORK and be sure you understand what you are purchasing.

 Choosing a Company

You should choose a company that has:

  • A strong financial rating,
  • Has a clean history of paying claims
  • Has good rate stability over time.

A specialist in this product line will be able to answer all of those questions for you. Getting expert advice won’t cost you any more – and it could save you a lot of money and grief.  Ask the person you are working with how many policies she/he sells.  Experienced professionals sell 30+ policies a year.

Know the 2 Broad Types

Hybrids & Traditional

  • Hybrids are built on a life or annuity chassis and have long term care as a rider.  These appeal to folks because they are a win/win — either you have care and it pays or you die without needing care and there is   benefit to your heir(s).  However, be cautious:  These are generally for persons of higher net worth as they:
  • Traditional Policies work like your homeowners or car insurance — if you never need them, the premium is gone.  There is usually no cash value or value to heirs.  The advantage of them is they can pay more for your care down the years and their costs are usually substantially lower than the hybrids (more affordable for middle-class folks, in other words).

There are however, several things that will be similar across any tax-qualified policy you look at.

4 Basic Building Blocks

  1. Benefit amount: how much the policy will pay each day or month for care.
  2. Time multiplier: typically in the form of years (2 years, 5 years, 6 years, etc.)
  3. Deductible: the number of days you pay for care out of your own pocket before the policy will pay. Choices are usually 30, 60 or 90 days, though you will occasionally see 120 or 180 days.
  4. Inflation protection: Choices are usually simple, compound or CPI. The younger you are when you buy, the more you need compound.

There are MANY other bells and whistles that you may want to consider.   A competent professional can help you evaluate if any of these are a good fit for your situation and goals AND help you price shop the major carriers to get the best bang for your buck.

The National Association of Insurance Commissioners’ will provide you with a free copy of their Buyer’s Guide which will review and define all of the types of options you can select among.

These products are like a fine suit.

They should be tailored to fit you, not bought “off the rack”.


Worksheet for Buying Long Term Care Insurance 

More information