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May 9, 2012 / Greater New Britain Chamber of Commerce

Long Term Care Insurance: CzepigaDalyDillman’s 10 Tips You Should Know

Considering Long-Term Care Insurance?

10 Tips You Should Know

By Paul Czepiga, CzepigaDalyDillman

Few of us want to face up to the struggles advanced age can bring, much less plan for them. But since it’s a good bet that you’ll live longer than previous generations in your family, you have to ask yourself this question: Will I be able to afford those extra years without demolishing my lifetime of saving when I need long-term care?

You may be thinking that “long-term care” means living in a nursing home. Not true. Simply put, it is the help you’ll need for any life-changing event that leaves you needing extended care…no matter where you live.

Whatever form of care you choose, the facts are the same: the costs of long term care is a financial threat that can wipe you out in no time…especially in Connecticut. Just take a look at the cost of a nursing home in Connecticut today, it averages $134,000 a year, or $368 a day! And a recent study just sited Hartford as the place with the highest costs in home health care.

So what do you do? Put simply, here are your choices: 1) Do nothing, and pray that just because 7 out of 10 people have a long-term care need it won’t happen to you or your spouse, 2) start to transfer your assets, that you might be eligible for Title 19 (Medicaid) in the future, or 3) consider long term care insurance, but be very smart about the policy you buy.

How can you evaluate a policy if you don’t know much about it? Here are some tips to get you started:

1.      Don’t wait too long. Procrastination is the most costly enemy when it comes to buying long-term care insurance. Although there is no perfect age, it’s important to buy it when you are younger (premiums increase with age), healthier, and more likely to be approved for coverage. Factor in your family’s health history (any illnesses you’re prone to?) and your financial resources (will this premium put you in debt?). And don’t ignore the possibility that an accident or illness could leave you requiring care for extended periods.

2.      Choose your benefit period wisely. This is the amount of time you will receive benefits once a claim begins. Policies are available with an unlimited or lifetime benefit, but usually carry higher premiums. The average claim lasts 2.5 years although 20% of people who file a claim will need long term care for more than 5 years. Ideally, you don’t want to outlive your benefit.

3.      Learn what is covered and what is not. Make sure you find out what kind of care is included and in what type of facility. Imagine finding out that you bought a policy that provides just nursing home care when your wishes are to be cared for at home. See if your coverage includes adult day care, respite care for the primary caregiver and hospice services.

4.      Think through your daily benefit. This is the amount a policy will pay per day.  A low rate will save you lots in premiums but may leave you short when you need care the most; a high rate will cost more but will keep you covered. Checking the average rate for care in your area is the smartest way to help you decide your daily benefit. If you end up moving somewhere where care is less expensive, ask if you can reduce your coverage.

5.      Plan for inflation. Because costs associated with long-term care will continue to rise, many policies will charge you extra for inflation protection. But if you choose a carrier within the Connecticut Partnership Act and you’re under 65, the state rewards you for buying long-term care insurance by guaranteeing the coverage you buy will have a 5% compound inflation protection.

6.      Ask about the benefit triggers. These are the requirements you must meet in order for your benefits to begin. In most policies, benefits kick in when you need help with activities of daily living such as bathing, dressing, eating, toileting or because of severe cognitive impairment. As a practical matter, the more “triggers” a policy recognizes, the easier it is to collect benefits.

7.      Consider the waiting period. This is the number of days you must pay for your care before the plan starts to provide you benefits (similar to a deductible on your car insurance). A longer elimination period may reduce your premium, but it can also increase the out-of-pocket responsibility for you. The most typical elimination period is 90 days.

8.      Request asset protection. You are fortunate to have access to the Connecticut Partnership which endorses policies that offer asset protection should you ever need to apply for Medicaid.  At no additional cost, Partnership policies allow you to protect assets equal to what your policy has paid in benefits. Those assest will be disregarded or ignored if you need to apply for Medicaid assistance.

9.      Be a smart shopper. Although there are only a few companies offering this insurance, you’ll want to make sure they’re well-rated. Go with a well-known company and research their financial strength by going to rating companies like Moodys.com, Standardandpoors.com, or Fitchratings.com. And don’t forget to look at their historic rate increases. Yes, premiums are not fixed, they will go up. But find a company with reasonable increases.

10.    Know the risks. To see if this type of protection is right for you, or if the policy you’re considering is a good one, talk it over with an elder law or estate planning attorney.  Insurance agents can tell you about policy details, but an experienced elder law or estate planning attorney will tell you how and whether  it fits into your overall estate planning goals. And they can tell you the risks should you choose not to protect your money with a long-term insurance policy.

Bottom line: the cost of long-term care is a financial threat with devastating consequences for you, your family and your investment portfolio. Whether it’s a long-term care insurance policy or another mechanism for protecting your hard-earned savings, it is imperative that you put some kind of plan in place.  If you don’t, you will be placing an insurmountable burden on your love ones and you will be risking, not only your entire nest egg, but your peace of mind.

This article was written and provided by chamber member Paul Czepiga of CzepigaDalyDillman, CT Magazine’s Super Lawyer for 2011-2012.  To find out how CzepigaDalyDillman can help you, call 860.594.7995 for more information.

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