New options make long-term-care policies more attractive
 
By: Paul Wenske, Columnist
Source: Miami Herald
Date of Article: May 11, 2003


If you had to go into a nursing home today in Kansas City, it would cost you about $147 a day.

And that's just one day. That translates to about $4,410 a month and $53,655 a year, according to MetLife Mature Market Institute, a research unit of MetLife Inc.

If you're lucky, your health is good now. But who knows what can happen? Not everyone is rich or guaranteed an ocean-view room in their kid's beach home in Florida. That's why many consumers 58 or older are buying long-term care insurance.

The financial incentive is compelling. The government predicts overall costs for long-term care will rise from about $123 billion currently to $207 billion in 2020.

The policies don't come cheap, though. The average annual cost is somewhere around $1,700. Premiums can vary depending on age, state and the amount of coverage you need.

But newer options are making policies more flexible and more attractive to consumers. The biggest change in recent years is that most policies now cover home care as well as nursing home care.

"Ten years ago, only nursing home care was covered," said Elizabeth Clemmer, associate director of AARP's public policy institute in Washington, D.C. "That's hardly what people want now. Now they want a range of options depending on their circumstances."

If you are contemplating long-term care insurance, here are some options you may want to check out. Though, as you might expect, any option will add to the overall cost:

Rate protection: This locks in the cost of your policy for anywhere from five to 20 years.

"You don't have to worry about the rates ever going up," said Arvin Pfefer, a Kansas City independent agent who wrote the Consumer Guide to Long-Term Care Insurance.

Pfefer said you may not need this option if "you can withstand periodic rate increases." States have lately sought to induce insurers to keep rates manageable. But rates can increase unpredictably.

Inflation protection: Similar to rate protection, this option protects you against an inflation rate of usually 5 percent, compounded annually. It is pricey but can be valuable to younger policy-holders who don't want inflation to eat up their assets.

Accelerated payments: This allows you to pay off your policy in, say, five to 10 years, or with just one initial payment. Again, this will guarantee that your rates won't go up because of inflation. But it's a gamble, because the option can add 30 percent or more to the cost.

The option also favors younger consumers, Pfefer said. "This might make sense if you are 55," Pfefer said. "It won't if you are 65."

Cash benefits: This acts sort of like an indemnity plan. You don't have to turn in any bills. Instead, once you qualify, you can receive cash benefits to use as you please -- for instance, to save up for a larger health-care need. "You have total choice," Clemmer said.

Weekly or monthly payments: Traditional policies limit reimbursement to a daily allotment. As a result, the daily allotment may not cover the full cost of, say, two or three days of home care. But a weekly or monthly payment may help cover the excess costs.

Employer benefit: This is more of a trend than an option. But increasingly, employers are offering long-term care insurance to their workers. In most cases, they are not picking up the tab. But the value to workers is that they can often qualify more easily and pay a lower group rate for coverage.

As long-term care insurance becomes more popular, experts caution that consumers should shop around. Even with more options, it's often hard to compare policies. They differ widely in such things as how long you wait for the policy to kick in.

Check the company's industry ratings with A.M. Best Co. or with Standard & Poor's Insurance Rating Service. You want your insurer to be around when you need it. Also, make sure the insurer you choose is licensed in your state. State insurance departments provide a lot of information on companies, such as how often they raise rates.

In addition, pay attention to your assets. Don't buy a policy that you can't afford, warned Clemmer. A rule of thumb is that if you qualify for Medicaid assistance, you don't make enough money to invest in long-term care insurance.

But for many people, long-term care insurance is a strong option that can provide security when your health and ability to care for yourself have diminished.

And with more options offered to consumers, there are stronger reasons to check out what's available.

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