Insurance World

Long-Term Care Insurance is still fairly new on the market and a lot of people don’t know that it even exists or what it covers. Even those who have heard the term don’t know always when benefits are paid, how they are designed, and who qualifies or needs coverage. Many people don’t think about this type of coverage until it is too late to get a great rate and higher benefits. They wait till they are past retirement age and closer to needing to cash in the benefits instead of investing earlier and maximizing your options. It is becoming more of a common practice for people to start thinking about what will happen 30, 50, or more years ahead. Many people invest in 401Ks, IRAs, stocks and bond, and other types of investments to prepare for the future. Many people think this will pay for living expenses and leisure activities once retired. Things don’t always go according as planned.

What happens in the unfortunate incidence of an accident and you need help with your daily living activities? Or, you get to a point in your elder years that you require home care, as you grow older? You may decide you would rather live in you home for a long as possible and would need to have enough for personal home care. Some seniors enjoy assisting living facilities that provide 24 hour nursing care, but still let you be as independent as you can. There are also those unfortunate instances where nursing home facilities are need to tend to varying degrees of illness. Long-term care is designed to provide you help with these services due to a long-term illness or disability. The average cost of these types of care can cost around $40-$100 thousand per year and sometimes more. It is a very quick way to eat your saving and social security benefits. If you think Medicaid or Medicare will help, think again. Even if and when you qualify, your saving is now gone and they will only pay up to 50% of the cost, someone has to come up with the rest. Long-Term Care insurance can help with these costs in the unfortunate event you require nursing care.

Who should consider Long Term Care Insurance? If you think you will not qualify for Medicaid or full Medicare benefits due to a large saving, assets, or high income, this is a program for you. You do not want to end up having your children to pay for these expenses while you have to have them and possibly well after your death. It will keep you able to leave your loved ones a little something instead of sucking all your assets dry. Also if you can afford to pay the premiums you will likely not qualify for assistance so would truly benefit. If you currently have chronic health issues or have a family history of a long-term illness you would be off purchasing now than waiting. It will be too late to get a policy after you have already developed a long-term illness or disability. If you think at any point you might fall into any of the categories you might want to consider getting a plan earlier to be safe and covered. You can purchase a policy from most large insurance companies. As always, every state has different insurance regulations, therefore it is best to check with your state on specific determining factors and qualifications.

This coverage will help provide nursing-home care, home-health care, personal or adult day care usually for individuals above the age of 65 or with a chronic or disabling condition that needs constant supervision. LTC insurance offers more flexibility and options than many public assistance programs. Long-term care is usually very expensive, which is why most people need insurance. For example, on average, nursing facilities providing skilled care charge $150 to $300 per day, or over $80,000 a year or more. Even custodial home care at three visits per week, can cost over $9,000 a year. Most LTC insurance policies will cover only a specific dollar amount for each day you spend in a nursing facility or for each home-care visit. Thus, when considering an LTC insurance policy, read the policies carefully and compare the benefits to determine which policy will best meet your own needs.

By following the eight rules explained here, you can save money, and just as important, you can save yourself from making serious mistakes when you shop for and acquire insurance policies.

Rule 1: Buy Insurance Only for Financial Risks You Can’t Afford to Bear on Your Own

The purpose of insurance is to cover catastrophes that would devastate you or your family. Don’t treat insurance as a chance to cover all your losses no matter how small or insignificant, because if you do you’ll fritter away money on insurance you really don’t need. For example, if your house caught fire and burned down, you would be glad you had homeowner’s insurance. Homeowner’s insurance is worth having, because you likely can’t—and you certainly don’t want to—cover the cost of rebuilding a house. On the other hand, insuring an old clunker is a waste of money if the car is only worth $800. You would be throwing away money for something you could cover yourself if you had to.

Rule 2: Buy from Insurers Rated A or Better by A.M. Best

Insurance companies go bust, they are bought and sold, and they suffer the same economic travails that all companies do. Between 1989 and 1993, 143 insurance companies declared bankruptcy. You want to pick a reliable company with a good track record.
A.M. Best is an insurance company monitoring service that rates insurance companies on reliability. Look for insurers rated A or better by A.M. Best, and periodically check to see whether your insurer is maintaining its high rating. If your insurer goes down a notch, consider finding a new insurance company. You can probably get A.M. Best’s directory of insurance companies at your local public library, and you can find A.M. Best on the Web at www.ambest.com.

Rule 3: Shop Around

There are many, many, many kinds of insurance policies, and insurers don’t advertise by price. You need to do some legwork to match your needs with the cheapest possible policy. Talk to at least two brokers to start with. Look for no-load insurance companies—companies that sell policies directly to the public without a broker taking a commission—since they usually offer cheaper prices.

Rule 4: Never Lie on a Policy Application

If you fib and get caught, the company can cancel your policy. If you lie on an application for life insurance and die during the first three years you hold the policy, the company will cancel your policy, and your beneficiaries will receive nothing. Health, life, and disability insurers run background checks on applicants through the Medical Information Bureau, so you can get caught lying. The medical examination you take for life insurance can also turn up a lie. For example, if you smoked tobacco in the previous year, it will come up in the test.

Rule 5: Don’t Buy Specific-Risk Policies—Buy General Policies Instead

When it comes to insurance, you want the broadest coverage you can get. Buying insurance against cancer or an uninsured motorist defeats the purpose of having an insurance policy. If you have ulcers, your cancer insurance will not help you. Get comprehensive medical coverage instead.

Uninsured motorist insurance is supposed to protect you if you get hit by someone who doesn’t have car insurance or doesn’t have adequate car insurance. But, in my opinion, you don’t need it if you have adequate car insurance yourself, as well as health, disability, and life insurance. I should point out that some attorneys advise you to carry uninsured motorist insurance because, by doing so, you may be able to recover damages for “pain and suffering.”

Rule 6: Never Cancel One Policy until You Have a Replacement Policy in Place

If you cancel a policy without getting a replacement, you will be uninsured for however long it takes to get a new policy. And if disaster strikes during this period, you could be financially devastated. This rule goes for everyone, but especially for people getting on in years, since older folks sometimes have trouble getting health and life insurance.

Rule 7: Get a High Deductible

You save money by having insurance policies with high deductibles. The premium for high-deductible policies is always lower. Not only that, but you save yourself all the trouble of filing a claim and needing to haggle with insurance company representatives if you have a high deductible and you don’t need to make as many claims.

People who buy low-deductible policies usually do so because they want to be covered under all circumstances. But the cost, for example, of a $400 fender-bender is usually worth paying out of your own pocket when compared to the overall cost of being insured for $400 accidents. Statistics show that most people have a fender-bender once every ten years. The $400 hurts to pay, but the cost of insuring yourself for such accidents over a ten-year period comes to far more than $400.

One other thing: If you have a low deductible, you will make more claims. That means you become an expensive headache for the insurance company. That means your rates will go up, and you don’t want that to happen.

Rule 8: Use the Money You Save on Insurance Payments to Beef Up Your Rainy Day Account

While you can save money on your insurance premiums by following the rules mentioned earlier, it’s probably a big mistake to use that money for, say, a trip to Hawaii. Instead, use any savings to build a nice-sized rainy day fund that you can draw on to pay deductibles. A big enough rainy day fund can cover both periods of unemployment and your insurance deductibles.