My Opinion On Purchasing A Long-Term Care Insurance Policy
I receive many requests for information on long-term care insurance. As I am not a planner, an insurance representative or a broker, I can only give you my personal opinion as a consumer of this product.
Long-term care planning is an important part of retirement planning and should be done with a person qualified and experienced in both areas, retirement and long-term care planning. (Note: It is a very wise person who purchases LTCI when younger vs. after retirement.)
Long Term Care Insurance is a product for the 21st century
Having said this, here are a few hints to use when you are considering the purchase of LTC insurance.
1. What companies offer the product? There are only a few companies in Canada that have this product. Always consider the company’s history and reputation before purchasing. You likely won’t be using the benefits for many years in the future so ‘company experience and stability’ are as important considerations as the monthly cost for the insurance.
The major players in this market are:
- RBC Insurance www.rbc.com
- Manulife Insurance www.manulife.com
- Clarica and Sun Life www.clarica.com
- 10-Star www.tenstar.com
- Desjardin Financial launched a new product in April 2005 www.dfs.ca
- Some associations offer this insurance for their members, such as Knights Of Columbus (www.kofc.org)
2. How to purchase? You can purchase LTCI from your trusted financial planner or insurance agent. If you don’t have an advisor to discuss this type of policy with, you might want to go to the websites of the companies listed above and ask them for an agent in your area. Alternatively, contact me and I will introduce you to my own long-term care specialist.
3. When to buy? Buy it ‘sooner rather than later’ as health is always unpredictable (in other words, don’t wait) (Better to buy 5 years too early than 5 minutes too late!)
Try to buy much before 65 as costs are based on age; look for a ‘spousal discount’; one must be ‘health eligible’ to qualify (but even if you have a certain health problem now, it doesn’t mean you won’t qualify–so always ask)
4. Coverage? Very important: If possible, buy a policy that allows you to pay for BOTH ‘home care’ and ‘facility care’ (as we can’t read the future, try to have your bases covered)!
5. Benefits? Look at your present lifestyle and ask carefully about all of the ‘benefits’–many are common for different companies’ policies. Always try to buy a policy that will best meet your future needs and your personal situation. Buy inflation coverage if possible.
6. Some questions to ask re: the features of the policy: What are you buying and what are you wanting to receive?
- What are the exact services I get from this policy when I need to use it?
- What are the daily/monthly benefit amount ranges, such as: how much a day, how many services per year?
- What method of payment does the company use? Are the $$$ paid going to be paid as a lump sum directly to my family or me eventually for my care? Or are the care-bills paid only when incurred? Which is best–consider all aspects–the use of the dollars if paid directly; family disputes over money; the elimination of financial abuse if the bills are paid; the management of the care payments; again think about payment methods in the context of your family situation and who will care for you, then decide which type of policy is best for you
- Do you want a policy where some of your premiums are ‘refunded’ to your estate; are you willing to pay extra for that feature (maybe not the best savings method, but you still might want to ask about this feature)?
- Can I renew?
- Is there a special coverage for Alzheimer’s?
7. Your Personal Care-Guide? Have you considered who will be your ‘care-years guide’, a child, a relative, a younger sibling, a best friend–whom do you value to help you out and make decisions with you–let them know if/when you buy a policy so they can access it at the time needed (maybe communicate via a letter or note so no one forgets later).
8. Claiming? Activities of Daily Living (ADLs)? What is the language you need to understand? Ask your long-term care specialist to give you a sample policy for the company recommended to you. Then, ask your agent/planner/specialist to explain carefully how the policy works: understand the term ‘activities of daily living’, understand the ADLs of the policy you are considering; understand how these make you eligible to claim, you don’t want any surprises later!
9. Think about it? If you can, avoid fixed-amount policies and be careful when ‘switching/substituting one policy for another’ . Any amount of long-term care insurance is better than nothing when planning for care-years stage of life, but fixed amount policies, for say, $200,000, may run out of money before you run out of need for the money! In addition, some companies do not offer LTCI but do offer you the opportunity to transfer your disability insurance for LTC needs–I do not recommend that method of covering long-term care needs, in and of itself, as I have rarely seen enough disability or CI (lump sums) available to cover long-term care costs. (What do you do if the lump sum runs out? If the CI is for half a million dollars or so, you might then consider this method, if less, NOT A GOOD IDEA.) This method may be an option if you are also going to purchase a LTC insurance policy as well as the income replacement and critical illness policies.
10. Cost of the insurance? Very important: Try to put the risk of needing care as you age in perspective – what are you already paying for and what is it costing?
BUT, be sure that you ask the following important question regarding the cost of your premium over time: how is my premium going to go up in cost over the years (the cost of your premium may go up ‘about’ every 5 years); BUT what you need to know is, what is the maximum cost you will have to pay for this coverage (let’s say, when you are in your 70’s or 80’s).
Look for an insurance policy from an insurance company that can tell you the cost forever ‘when’ you buy, not promises for later.
Yes, the cost is a barrier to buying, but personally I would rather make do without some other type of insurance or item in my life than this particular policy given our environment and health system circumstances and given the costs of care per month or per year versus the cost of my policy per month or per year; you do the math.