With the rising cost of long-term care services in California and throughout the United States, the importance of addressing long-term care planning as part of a complete estate plan cannot be understated. For many individuals, that includes considering the purchase of long-term care insurance. Because not all policies offer the same benefits or protections, it is essential to understand how to evaluate a policy before committing to a purchase. With that in mind, the Los Angeles attorneys at Schomer Estate & Wealth Advisors offer a guide to help you navigate the evaluation process for long-term care insurance policies.
Understanding the Basics of Long-Term Care Insurance
Before you can properly evaluate a long-term care insurance (LTCI) policy, it is important to understand what LTCI is designed to do. In short, a LTCI policy helps cover the cost of services when an individual is unable to perform routine daily activities without assistance due to age, illness, injury, or cognitive decline. Policies may provide coverage for a variety of services, including help with bathing, eating, dressing, and more extensive care provided by a skilled nursing professional.
Important Factors When Evaluating a Long-Term Care Insurance Policy
Selecting the right long-term care insurance policy involves a thorough review of several critical factors. You must take the time to ensure that the policy will meet your future needs while remaining affordable and practical.
One of the first elements to consider is the scope of coverage. Not all policies cover every type of care setting. Review whether a policy pays for care received in different settings, such as nursing homes, assisted living facilities, or your own home. You should also verify whether the policy covers different levels of care, ranging from custodial to skilled nursing services.
Next, you will want to examine the benefit triggers within the policy. These are the specific conditions that must be met before the insurer will begin to pay benefits. Typically, a policy will require that the insured person is unable to complete a certain number of activities of daily living (ADLs) or has a qualifying cognitive impairment. Understanding exactly what is necessary to trigger benefits is crucial.
When reviewing a policy, pay close attention to the benefit amount and maximum benefit duration. The policy will specify a daily or monthly benefit amount along with either a set number of years or a lifetime cap on coverage. Compare the benefit levels to the current and projected costs of care in California. Inflation will almost certainly drive costs higher in the coming decades, so you should also investigate whether the policy includes inflation protection. Some policies offer automatic annual increases to the benefit amount, helping to maintain the value of your coverage over time.
Another key feature to review is the elimination period, which is similar to a deductible but measured in days instead of dollars. This is the period you must wait (and pay out-of-pocket) before benefits start. Shorter elimination periods usually mean higher premiums, so balance your financial situation carefully.
Speaking of costs, it is essential to review the premium structure of any policy you are considering. Some policies have guaranteed level premiums, while others allow the insurer to raise premiums over time. Premiums are typically lower if you purchase a policy at a younger age, but you may be paying those premiums for many years before needing to access any benefits. Make sure the policy remains affordable in the long term.
If a policy includes a provider network, take time to research the available providers. Make sure there are enough qualified providers in your preferred geographic area and that the providers meet your standards for quality of care. Some policies allow more freedom in choosing care providers, while others restrict you to a network.
Policies often offer optional riders or add-ons that can tailor coverage to your unique needs. Options like shared care benefits (allowing spouses to share a pool of benefits), international coverage, or additional home care benefits might make sense for your situation. Evaluate the cost and value of these options carefully.
The financial strength and reputation of the insurer is also of utmost importance. Long-term care insurance is a significant and lengthy commitment. Choose an insurance company with a strong financial rating and a solid history in the LTCI market. Ratings from independent agencies like A.M. Best, Moody’s, or Standard & Poor’s can provide valuable insight into a company’s reliability.
Finally, review any policy exclusions and limitations with care. Common exclusions include pre-existing conditions, mental health disorders unrelated to dementia, self-inflicted injuries, and care not deemed medically necessary. Understanding these limitations will help avoid unpleasant surprises down the road.
Can We help You Navigate Long-Term Care Insurance?
For more information, please join us for an upcoming FREE seminar. If you would like assistance navigating long-term care insurance within your overall estate plan, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisorsby calling (310) 337-7696 to schedule an appointment.
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