Long-Term Care Insurance

     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? The odds are nearly one in two that a person over age 65 will need long-term care for about 2.5 years at an average annual cost of $76,460 in 2008, making the average claim in excess of $200,000.

Evaluating Long Term Care Insurance Policies

     Fortunately, an appropriate Long-Term Care Insurance (also known as nursing home insurance) policy can be designed to fit almost any budget. Most policies share some common features you should know, to include the following:

• Benefit Amount: How much and for how long will the policy pay?
• Benefit Triggers: When will the policy pay benefits for nursing home care?
• Inflation Protection: Will the purchasing power of the Benefit Amount increase to cover the rising cost of nursing home care?
• Level of Care: Are Home, Custodial and Intermediate Care covered, along with Skilled Nursing Care?

Caveat Emptor

     Caveat Emptor! is Latin for Let the Buyer Beware. With all of the companies selling long-term care (or nursing home) insurance, this is an appropriate warning. When shopping for a 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 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, Fitch, Inc., Moody’s Investor Service, Inc., Standard & Poor’s Insurance Rating Services, and Weiss Research, Inc.
     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, visit the National Association of Insurance Commissioners  Web site for a copy of The Shopper’s Guide to Long-Term Care Insurance, and other valuable resources, or contact them by phone at (816) 842-3600. Given all that is at stake, doing your homework is a must.