No one relishes the notion of paying insurance premiums of any kind. After all, you can pay and pay and pay ... and never collect on a claim. If you are fortunate.
The purpose of insurance is to transfer a risk that you can afford (i.e., the payment of a premium with no guarantee of its return) to cover a risk you cannot afford. For example, what homeowner does not insure their personal residence from damage due to a fire? Or, what automobile owner does not insure their auto from damage due to a collision? Consider this: The odds of a major fire insurance claim are about one in 88, with an average claim of $2,000. The odds of an auto insurance claim are about one in 47, with an average claim of $8,000.
Against this backdrop, why would any responsible, mature American (i.e., age 65 or older) not insure against the financial risk of requiring long-term care at some point? Consider this: The odds are nearly one in two that a seasoned citizen will need long-term care for about 2.5 years at an average cost of $90,000 in 2010, making the average claim in excess of $225,000.
Long-Term Care Insurance
Fortunately, an appropriate Long-Term Care insurance (LTCi) policy can be designed to fit almost any budget. Most LTCi policies share some common features you should know, to include the following:
- Benefit Amount: How much and how long will the policy pay?
- Benefit Triggers: When will the policy pay benefits?
- Inflation Protection: Will the purchasing power of the Benefit Amount increase?
- Level of Care: Are Home, Custodial and Intermediate Care covered, along with Skilled Nursing Care?
Caveat Emptor! is Latin for Let the Buyer Beware. With all of the companies selling LTCi, this is an appropriate warning. When shopping for an appropriate LTCi policy, remember that financial strength is the key consideration. As with any form of insurance, the policy is only as solid as the ability of the insurance company to pay your claim. Check on the financial strength and reputation of the insurance company before you sign on the dotted line.
There are several established insurer rating services, such as A.M. Best Company (www.ambest.com), Fitch, Inc. (www.fitchratings.com), Moody’s Investors Service, Inc. (www.moodys.com), Standard & Poor’s Insurance Rating Services (www.standardandpoors.com), and Weiss Ratings, LLC. (www.weissratings.com).
Visit these services online or at your local public library.
Reputation also is important. Contact your state’s Insurance Commissioner regarding the status and history of complaints by policyholders of any insurance company you are evaluating.
Finally, contact the National Association of Insurance Commissioners for a copy of The Shopper’s Guide to Long-Term Care Insurance, and other valuable resources, by phone (816) 842-3600 or online at www.naic.org. Given all that is at stake, doing your homework is a must.