Long Term Care Insurance (LTCI) is an insurance policy that covers some or all of the cost of your long term care, in the event you need it. It may be because of complication of a chronic illness such as diabetes, a serious accident or cognitive impairment as a result of Alzheimer’s disease.

Specific triggers for coverage can vary from company to company and policy to policy.  At Genworth Financial coverage can begin (depending on the terms of the particular policy) when: 

• You can no longer perform at least two of the Activities of Daily Living (ADLs) without assistance and your physician agrees that you will not be able to do so for a period of at least 90 days. These ADLs are bathing, dressing, feeding oneself, toilet use, bowel and bladder continence and transferring (getting in and out of bed or a chair independently).
• You require supervision as a result of cognitive impairment from a condition such as Alzheimer’s Disease.

Before you can actually buy LTCI you have to medically qualify. Typically, an agent will help you complete a health questionnaire as part of the application and the insurance company will, with your consent, obtain medial records. Underwriters will then make a decision about offering coverage. In making that decision they focus more on illnesses and diseases that increase your risk of not being able to care for yourself in the future, rather than those that increase your risk of dying or of needing medical care. An example would be severe, potentially crippling arthritis.

What are the important points about a policy?

LTCI is at least perceived as being a complicated product. While the concept is straightforward, the devil is in the details. Below are the main details to focus on that can make purchasing a LTCI product less of a hassle or worry.

• Financial stability. Look more to company that have been in the business for some time- Genworth has been selling policies for 35 years- and that have at least an AA rating by Standard and Poors.
• Rate Stability: Look for companies, like Genworth, that have not raised premiums on policies that the company issues. Note that all companies maintain the right to raise premiums by group for policies that they have issued. Companies with more experience and more disciplined underwriting, tend to not have to raise premiums.
• Amount of coverage: this is something that is a function of what you can afford and discussions with financial advisors and long term care insurance specialist. In general, more coverage in terms of dollars per day or month and the number of years affords you more flexibility and piece of mind for you and your loved ones in the event of needing long term care
• Inflation protection. This is very important as the cost of care increases each year and you are considering purchasing a product that, if you do need it, you may use 20 years in the future. Nursing home care at $70,000 year today will cost about $210,000 per year in 20 years at 5% compounding annual inflation.
• The waiting period or elimination period. This is similar to a deductible in other types of insurance policies.  It is the length of time from the start of eligibility to the point in time when the LTCI policy actually starts to pay for LTC. Typically 90 days it can range from 0 to 365 days ( a year). The longer the elimination period, the lower the cost of the policy.
• The scope of coverage. With most dollars NOT being spent on nursing home care, it is important that your policy cover home  care, adult day care and care in an assisted living facility. With Genworth you can buy a policy or a rider to a policy where home care is covered as soon as you qualify for LTC. The elimination period is 0 days.

There are other riders, options and details about a LTCI policy, which is why - in the end - it is important to review in detail, a potential purchase of a policy with a long term care specialist or your financial advisor.

What is long term health care?

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