What to Consider When Purchasing a Long-Term Care Policy

“Health is a state of complete physical, mental and social well-being, and not merely the absence of disease or infirmity.”
–Unknown

When I woke up, I was in the back of an ambulance being sped to Cornwall to a trauma center. I didn’t really remember much of what had happened or how I got there a policy. I was playing on my intramural team handball team as a goalkeeper. Apparently, there was a long, high ball. I jumped up to get it, and the other guy went under me, flipping me upside down. I landed on my head. But, by gosh, I held onto the ball and nobody scored! However, I had a pretty serious concussion and was only a sliver away from having broken my neck. For the next couple of days, I’d drift in and out of consciousness, asking what had happened and conveniently forgetting it as soon as they told me the answer.

The next year, I took up boxing instead.

I really don’t know how close I was to being disabled. I’d had a nasty, brutal fall and landed square on my head. See, being hard-headed paid off! Since I was a cadet at West Point, and technically in the Army, I imagine that I would have been taken care of, but I really don’t know. What I do know is that I wasn’t that far away from having needed long-term care for the rest of my life…as a 20 year old.

It’s something that none of us want to think about – the idea that there may come a time when we’re no longer self-sufficient. However, if we let Monkey Brain take over and dig our heads in the sand, if something happens, then we face the possibility of draining a significant portion or all of our assets.

For women, this is a particularly salient issue. Women live longer than men, which means that if the husband requires significant care and passes, it could drain the joint accounts and leave the woman with few assets at a time when she can no longer earn money because of advanced age.

This is important. If you’re in your 40s or older, look into long-term care insurance.

Don’t know what to look for? Confused by insurance salesperson speak and chart porn? Here are some things to consider when looking at a long-term care policy:

Tax qualified – this means that the benefits from the LTC policy will not be taxed by the federal government. There is a 90 day waiting period for benefits to begin to qualify, so if you receive benefits before a 90 day waiting period, then the benefits will probably be taxed. Ask your agent about writing a tax qualified (TQ) policy. TQ policy premiums can also count towards your medical expense deduction if you qualify.
In-home care – this means that you will be treated by a professional caregiver in your home rather than in a nursing care facility. Look for at least 6 hours a day of caregiving in the policy.
Home modification – since you need to be unable to perform at least 2 of the 6 activities of daily living (ADLs – bathing, transferring – moving from one place to another, eating, dressing, continence, and toileting), and many of these involve movement of some sort, modifying the home to accommodate wheelchairs or assisted movement devices – think of ramps and wider doors as an example – could help you out as well as save you money
Assisted living – some LTC policies can add this as a rider or as a stand-alone policy where you can receive coverage for living in an assisted living facility rather than needing to be in a nursing home. Also look into continuing-care facilities which allow you to start out completely independent in a retirement community (usually 55 and over age group) and then have both assisted care and nursing care capabilities in the same community.
Daily benefits – make sure that the daily limits are sufficient to cover what you will not be able to pay out of pocket for care. Just because you spend $X per month in expenses does not mean that those expenses will go down just because you’re receiving long-term care, particularly if you’re married.
Inflation protection – Long-term care costs are rising faster than the overall inflation rate. Additionally, you may not need long-term care for many years. Therefore, unless you’re into your seventies, I recommend getting compound inflation protection on your policy.

Naturally, some of these are add-ons and riders to a basic long-term care policy, so you may have to pick and choose based on your budget; however, unless you’re wealthy enough to be self-sufficient and to pay for your care needs out of pocket, I recommend looking into a long-term care policy, as the alternative is to spend your assets down until you qualify for Medicare, which can be financially devastating for a family.

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John Davis

John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.