Long Term Healthcare

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Photo: Sri Maiava Rusden

To Buy or Not to Buy

Deciding to buy a long-term-care insurance policy ultimately comes down to a matter of financial security and whether you have the means to do so or not.

“Long-term-care insurance is the greatest gift to give to those you love, to let them know what you need and what you want,” says Mishan.

Mishan can attest to how costly, but important long-term-care insurance is. As a former caregiver to her father, who had Alzheimer’s disease for eight years, she no longer has the finances she needs to purchase a policy for herself. “If you can afford long-term-care insurance, that’s a huge saver, but I can’t,” she says. “We spent all my and my father’s money on his legal fees and care giving. There’s nothing left.”

She recommends financially planning for yourself at an early age, but to also keep in mind that, in addition to potentially needing long-term-care for yourself, you might have to care for a spouse or parent at the same time.

 

If you opt to purchase a policy, here are some tips to keep in mind:

Calculate. If you are still working, be sure to calculate long-term-care insurance premiums into your retirement budget. Cunningham also recommends asking your employer if the company offers employee long-term-care insurance plans, but understand that many are “as-is” policies and you cannot add or subtract coverage options.

If you are already retired, update your budget to include long-term-care insurance premiums to make sure you can afford a policy and still live on a fixed income. Don’t forget to also include unexpected costs, such as medical bills. 

The National Association of Insurance Commissioners’ Shopper’s Guide to Long-term-care Insurance—a booklet that Sage PLUS offers its callers—suggests that you should spend no more than 7 percent of your income on premiums and be able to withstand future premium rate hikes, because it’s likely that they will go up at some point during your investment.

Talk to your loved ones. “Have candid discussions about what’s going to happen when you get older and how you are going to pay for [long-term-care],” says Coral Andrews, the vice president of Healthcare Association of Hawai‘i, a nonprofit organization representing the state’s healthcare providers. Talking with your children will not only inform them of your future health plans and save them from financial and emotional stress, but they may be willing to help you pay your insurance premiums.

If you don’t have any children (or you don’t have a harmonious relationship with them), don’t panic. Planning for long-term-care regardless of having an abundance of family to potentially assist you, will, in the end, result in better peace of mind and more options. However, you might want to consider a more robust policy.

Tip: Federal programs, such as Medicare and Medicaid, are your last line of defense.  Plan accordingly.

Choose a stellar insurer. Pick an insurance company with a good track record of offering long-term insurance, because, after all, you will be investing in them long-term. You can visit online Web sites for insurance company ratings by companies such as A.M. Best Co., Standard and Poor’s or Moody’s Investors Services, and for a fee (except for Moody’s), receive in-depth analyses and ratings on the companies’ long-term insurance histories and standings. You can also call the Hawai‘i Department of Commerce and Consumer Affairs to find out more about a company’s local branch, as well as its record of customer complaints.

Be meticulous. Get detailed information about your policy and choose only the options that suit you best. Read, reread and read again your chosen policy to understand what it does and does not cover. Don’t be afraid to grill your insurance agent on the details and fine print, including the company’s rate-hike history.

Tell the truth. When filling out the policy application (or having the insurance agent fill it out for you), answer all questions about your health history truthfully and completely. The National Association of Insurance Commissioners warns not to sign the application until you have read it over, making sure all areas were accurately filled out.

If you fudge your policy application and the company insures you on false claims and later finds out, the insurer will deny you your benefits, or cancel the policy altogether.

Protect against inflation. Inflation protection is one of the most important options you can decide on. It allows the cost of your care benefits to increase with the rising inflation of long-term-care costs in the future. For example, if you purchased a policy covering $250 a day in a nursing home this year, it would cost $311 a day in 2018—and that’s only at a 2 percent inflation rate.

Inflation protection will raise your premium costs, but if you don’t have it, you’ll have to pay the cost difference out of pocket. It’s very likely that the care you’ll eventually need will be more than what you planned for when you bought your policy. Also, remember to always opt for compounded interest rather than simple interest to better protect yourself for the changing costs of healthcare.

Cunningham notes that healthcare costs used to be fairly constant, but that is no longer the case. “You used to sign up for one plan and it would be with you basically until you died, but it’s not like that anymore, it’s changing all the time,” she says.