$100,000 (expense) minus $50,000 (fixed income) minus $25,000 (investment income) equals a $25,000 annual deficiency.
The individuals would face a $25,000 annual shortfall in the preceding case. Therefore, it would be sensible to consider purchasing a long-term care insurance policy to cover this deficiency. Alternatively, some people may choose to secure their retirement nest egg by covering the entire $100,000 each year with long-term care insurance.
Step 2: Start your search.
If you decide you want LTC insurance, identify a core group of insurance firms from which to choose. If you already have a trusted insurance agent, consult with them for a referral. At this time, the most critical worry is that the company will still be around if and when the benefit is required. Choose companies with strong financial ratings from the four major insurance rating agencies: A.M. Best, Standard & Poors, Duff & Phelps, and Moodys. Consider companies with ratings no lower than “A” or its equivalent.
Step 3: Narrow down your search
Examine the size of the company’s assets and how long a company has been in existence, especially if it is in the long-term care insurance market and has a track record. Pay special attention to the history of rate hikes. Also, contact your state’s Superintendent of Insurance to discover any issues with the company. Finally, look for firms that provide a variety of policies, such as individual coverage, joint coverage, family coverage, and partnership plans, if applicable.
Step 4: Personalize the policy and select the best plan for you.
This is the most difficult phase since the number of variants accessible is mind-boggling.
The three factors that will have the greatest impact on the cost are:
How much advantage is purchased? (received either as a daily or monthly benefit)
How long will the benefit last? (usually defined by a specified number of years)
When the benefit begins (defined by a specified number of days).
Remember that there is no “correct” policy, only policies that are more appropriate for you and your spouse. Several companies are likely to offer great programs for roughly the same price.
Other Points to Consider
Guaranteed Renewability: The majority of long-term care insurance contracts are guaranteed renewable, which means that the insurance company must renew your coverage as long as your payments are paid on time. However, guaranteed renewable provides insurance firms with protection against adverse claims experiences. That is, while a corporation cannot single you out and raise your particular premium, it can raise the cost of insurance for everyone in a certain group.
COLA (Cost of Living Adjustment) Rider: If you don’t file a claim for a while, make sure you have enough coverage to cover any increases in the cost of care. To protect against inflation increases, you’ll want the policy to provide inflation protection both before and after you to make a claim.
Non-forfeiture Benefit: If you develop cognitive impairment and are either ignorant of receiving or neglect to pay your premium bill, your policy coverage may terminate owing to nonpayment of premium. The policy would not be canceled if it had a non-forfeiture benefit.
Waiver of Premium: If you file a claim under the policy, the firm will waive all future premiums for a defined period while receiving benefits. The premium waiver period varies per carrier: some provide 90 days, others 100 days, and others 180 days. Choose a policy with a premium waiver that takes effect after a limited length of time.
Given all of the factors, here is a list of questions you should ask before enrolling in a long-term care insurance plan.