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Ways to Assess Long-Term Care Insurance Companies

Long before anyone expects to be thinking about in-home caregivers or nursing homes is precisely when they should be considering long-term care insurance.
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Long before anyone expects to be thinking about in-home caregivers or nursing homes is precisely when they should be considering long-term care insurance.

"Age 70 is much too late," said Jesse Slome, executive director of the American Association of Long-Term Care Insurance. "The ideal age to shop for long-term care insurance is much younger, about 52 to 64 years of age."

What is long-term care insurance? According to Mr. Slome, one of these policies just might ensure the possibility of staying in one's own home with in-home care, rather than relocating to a nursing home. "Long-term care insurance is nursing home avoidance," Mr. Slome said.

The Long-Term Care Insurance National Advisory Center notes on their website that everyone has a 70 percent chance of needing long-term care in their lifetime. In a survey, the Long-Term Care Insurance National Advisory Center found that 91 percent of those surveyed would prefer to receive long-term care at home. Long-term care insurance is there to help pay for those who do not need care in a skilled nursing facility.

Another way of looking at it is when someone needs help to perform the essential activities of daily living -- such as bathing, eating, getting dressed and using the bathroom -- and consider who will do that, and how it will be paid for. When it comes to one's need for long-term care insurance, factor in an ability to pay premiums, protecting assets and relieving the caregiving burden on loved ones.

The Homewatch CareGivers Guide to Legal and Financial Planning Needs of Seniors offers tips on how and when to buy long-term insurance. This should be part of a discussion with loved ones when working on an estate plan, too.

When it comes to shopping for long-term care insurance, there are a limited number of companies to choose from.

"Financial ratings are the most important," said Scott Olson, an insurance specialist and author of "The Guidebook for Making Long-Term Care Insurance Easier." The American Association of Long-Term Care Insurance provides ratings for 10 leading companies on their website.

The fact is, Olson points out, that there are only three ways to pay for long-term care: cash, Medicaid or long-term care insurance. First, you have to be able to qualify for Medicaid, and not everybody does. Second, there may not be enough cash.

"It's the same reason why you buy homeowner's insurance," Olson said. "Essentially, you are insuring income stream and assets from high risk."

Olson recommends buying long-term care insurance from a solid company that will be there for many years.

"I would ask, 'How long have they been offering long-term care insurance?'" said Mr. Slome. "How many policies do they have on the books? You want to find 100,000 or more. The decent-sized companies are from 100,000 to 1 million."

Another consideration is how recent was the policy that the agent is showing you filed and approved in your state. Mr. Slome gives the example of a company in 2010 that was quoting significantly lower premiums than even the lowest standard rates. Long-term care insurance was such a small part of that insurance companies' overall business that they only had an old policy for sale, which was subject to rate increases.

Mr. Slome also advises people shopping for long-term care insurance to know the difference between agents and brokers. Agents work for a single company, and brokers represent several companies. "Each company sets their own pricing," he said. "There is a huge difference between the discounts they offer. From a consumer standpoint, either do the shopping yourself and compare or find out if the agent or broker has access, and if they did comparisons."

And start comparing as soon as possible -- whether for yourself or your loved ones -- so that health problems don't prevent you from qualifying for long-term care insurance.

"When you turn 65, you go on Medicare," Mr. Slome said. "Then people go to the doctor and find out they are diagnosed with this or that, and that can disqualify them from long-term care insurance." He added that a whopping 40 percent of long-term care insurance applicants are turned down for coverage.

"Medicare does not pay for most long-term care," he said. "Medicare is designed to help you recover. Long-term care is not health insurance, but when you are not going to recover, like if you have Alzheimer's disease. A big misconception that consumers have is that Medicare will pay, but I'm sorry, it's like trying to buy car insurance after you have an accident."