What Should I Look For In Comparing Policies?

You should compare similar policies. For instance, compare nursing home only policies to nursing home only policies.

Type of Coverage

Benefit Payments
You should review how the policy pays benefits as policies pay benefits in different ways. For example, some policies pay a fixed amount for each day you are confined in a nursing home or each day you receive community-based care, regardless of the actual cost of the care. Other policies pay according to the provider's actual charges up to a fixed daily amount or a percent of the charges. Policies paying benefits based on a usual and customary charge basis or prevailing charge basis contain a notice to this effect on the face page of the policy.

Duration of Benefits
You should also examine the period of time benefits are paid. Benefits may last for only one year or for the rest of your life, depending on the policy. In general, plans that provide payments for longer periods of time are more expensive. You may select from several options when you first buy the policy. You may not be able to increase the benefit amounts at a later date without proving insurability.

Policy Limits
Policies frequently limit benefits to specific types of services provided by specific types of facilities or agencies. For example, services provided in the home may be limited to those provided by a licensed home health agency. Other types of personal care, help with household chores, or other services may not be covered. One policy may cover ambulance service to and from the hospital, but the same type of policy offered by another company may not. In other words, it is important to check each policy to be sure you know exactly what services are covered. The kind of long-term care services you may need or want may not be covered under the policy.

Policy Definitions
You should review the policy's definitions regarding the types of facilities that are covered. The state of Wisconsin has licensed, certified and registered facilities that provide differing levels of supportive care, personal care, and nursing services. Policies that provide coverage for nursing care in a licensed facility will cover care in a nursing home. However, the policies that provide coverage for nursing care in a licensed facility will not cover care in an assisted living facility. Assisted living facilities are certified or registered to provide assisted living services. They are not licensed to provide nursing care. Long-term care policies usually do not cover any care in a community-based residential facility.

You should determine whether premium payments are based on issue age or attained age. Attained age premiums automatically increase as one ages. Issue age premiums will increase only if premiums are increased for everyone insured under the policy form.

You should compare prices when you compare policies. Ask questions. Check to see if the policy you are considering is a lot less or a lot more expensive than other policies with similar benefits.

Standards for Benefit Triggers
Policies are required to pay benefits based on benefit triggers called activities of daily living (ADLs). Policies must base benefits on at least six ADLs. They are:

  • Bathing—Washing oneself by sponge bath, or in either a tub or shower, including the task of getting into or out of the tub or shower.
  • Continence—The ability to maintain control of bowel and bladder function; or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene, including caring for a catheter or colostomy bag.
  • Dressing—Putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs.
  • Eating—Feeding oneself by getting food into the body from a receptacle (such as a plate, cup, or table) or by a feeding tube or intravenously.
  • Toileting—Getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.
  • Transferring—Moving into or out of a bed, chair, or wheelchair.

Some policies pay benefits based on seven ADLs.

Policies must pay benefits when you require assistance to perform three of the six activities of daily living or have a cognitive impairment. Many policies pay benefits when you are unable to perform two of the ADLs. A cognitive impairment is a deficiency in short-term or long-term memory, orientation as to person, place, and time, deductive or abstract reasoning, or judgment as it relates to safety awareness. Assessment of ADLs and cognitive impairment can be performed by a certified or licensed health care practitioner, such as a physician, a nurse, or a social worker. You would be considered unable to perform an activity of daily living if you need hands-on assistance to perform the activity or, in the case of a cognitive impairment, must have supervision or verbal cueing to protect yourself and others.

Preexisting Condition Waiting Period
If you are sick, or under a doctor's care for a particular condition when you purchase the policy, you may not be eligible for benefits for that condition until a certain period of time has passed. This is called a preexisting condition waiting period. Preexisting condition waiting periods vary from company to company. The longest waiting period permitted in Wisconsin is six months. This waiting period can be applied only to conditions that you have not been asked about on the application and for which you have seen or been treated by a doctor in the six months before you take out the policy. However, if you have preexisting medical problems at the time you apply for coverage, the insurance company is not required to accept your application or to issue coverage.

Elimination Period
Policies frequently have elimination periods. This is the number of days that you must be in a nursing home or other facility receiving the care covered by the policy or the number of home care visits that must be received before benefits are paid. You will pay all of the cost of care during the elimination period. The longest elimination period permitted under Wisconsin law is 365 days. Usually, the longer the elimination period, the lower the premium. The longer the elimination period, the less chance there is that you will collect benefits. Elimination periods do not begin until the preexisting condition waiting period has been satisfied. Wisconsin law allows insurance companies to offer elimination periods up to 365 days, but the company must also sell the same type of policy that offers elimination periods for 180 days or less.

Inflation Protection
If your long-term care policy does not include a way for benefits to increase as long-term care costs increase, you may have a benefit that is too low by the time you need care. All policies must offer the option to purchase inflation protection at 5% compounded annually. Some policies may allow you to purchase additional coverage at a later date. Policies that have an inflation protection rider and have dollar amounts listed for the maximum benefits must each year increase both the maximum benefits and the daily benefits at the rate of 5% compounded annually. Adding an inflation protection rider to a policy will increase the cost of the policy.

Waiver of Premium
Many policies provide for a waiver of premium. This means that after a specified period of time of receiving benefits under the policy you may apply to have your premiums waived until you are no longer receiving covered care or the lifetime maximum benefit has been paid.

Nonforfeiture Benefits
All policies must offer the option to purchase a shortened benefit period nonforfeiture benefit option. The nonforfeiture benefit provides paid-up long-term care, nursing home only, or home care only insurance coverage after you have paid premiums for three years but no longer continue to do so. The maximum benefit under the paid-up policy is the greater of 100% of the sum of all premiums paid for the policy, including premiums paid prior to any change in benefits, or 30 times the daily benefit amount in effect on the lapse date. As with the inflation protection option, a nonforfeiture benefit rider adds to the cost of the policy.

Long-Term Care Rate Increase Standards
If you have a policy that was issued between August 1, 1996, and December 31, 2001, your policy is subject to certain standards that restrict the number and amount of premium increases. Your initial premium may not increase for the first three years that the policy is in force, and after that the rate is guaranteed for at least two years. It is important for you to know that if the company raises premiums on its long-term care policy forms by more than 50% in any three-year period, it will be restricted from selling policies in Wisconsin. Although rate increases are applied to everyone having the same policy form, it is possible that categories of individuals covered under the policy form will see different amounts of increase based on the riders they purchased and the amount of risk associated with their age category.

If you have a policy that is issued on or after January 1, 2002, your policy is subject to Wisconsin insurance laws that were amended to provide added protections, including rating practice and consumer protection provisions. Insurance companies are required to establish initial premium rates that are sufficient and are expected to remain the same over the life of the policy. Also, the insurance company is required to disclose to you your policy's past premium rate increases.

Long-term care insurance premium rates are increasing. You should consider whether you can afford the premiums for long-term care insurance now and in the future. Premiums for long-term care insurance have been rising and will continue to do so. You will be asked to complete a Personal Worksheet at the time you apply for long-term care insurance. A copy of the Personal Worksheet is included in the Wisconsin Guide to Long-term Care. A general guideline says you should not spend more than 7% of your annual income for long-term care insurance. You should determine whether you can afford to pay the premiums for the next 15, 20, or 25 years. Will you be able to afford the premiums if they increase 10%, 15%, 20% or more?

You may find that your income decreases when you lose your spouse. This may make it difficult for you to continue paying long-term care insurance premiums. However, women also tend to outlive their spouse. You may find that you have less family support and caregiving available as you age, which may require that you pay out-of-pocket for home health care or nursing home services.

Other Ways To Pay For Long-Term Care
Long-term care insurance is only one way of paying for potential home health or nursing home care. You may be able to rely on family support and caregiving. There may also be organizations in your community that have volunteers who provide support and caregiving services, or you may be eligible for veteran benefits and services. You may consider, as part of your personal financial plan, relying on personal savings, such as savings accounts, certificate of deposits, money market accounts, IRAs, a 401K, a Keough plan, life insurance accumulation options, or pension benefits. You may want to consider a reverse mortgage or a continuing care contract. A chart showing a comparison of some of these options is available at: http://www.medicare.gov/LongTermCare/Static/PayingOverview.asp.

Policy Exclusions
Long-term care policies may have certain exclusions. The most common are for mental and nervous disorders, preexisting conditions, care received outside the USA, and care needed as a result of self-inflicted injury.

NOTE: Under Wisconsin law once you are insured and have satisfied any waiting periods, including any elimination period, policies may not refuse benefits for irreversible dementia, such as Alzheimer's disease, provided you need the services covered by the policy. Policies may exclude coverage for other conditions or situations. You should carefully review the Outline of Coverage that you receive when you are solicited for the policy. The Outline of Coverage will list the exclusions and summarize the type of coverage offered by the policy.

All policies currently on the market are "guaranteed renewable for life." This means that your coverage will continue as long as you pay the premium. The insurance company may raise premiums, but only if it raises them for all individuals who have the same policy. This does not mean that your coverage will continue if you have exhausted the benefits in the policy. If you buy a policy with a one-year benefit period, your benefits will end after one year of the insurance company paying benefits. You will not be able to renew these benefits.

Policies also include reinstatement provisions. If you fail to pay your premiums, the insurance company is required to give notice to you and your designee that your policy will lapse in 30 days. If your policy lapses and you can provide proof of cognitive impairment or inability to perform activities of daily living, your policy can be reinstated if you request reinstatement within at least five months after the policy lapse and pay the past due premiums.

Cost of Policy
The premium may vary according to many factors, including the policy benefits, your age, sex, and place of residence. The conditions under which the premium can be raised and the actual premium charged are discussed in the Outline of Coverage. Policies purchased at younger ages are generally less expensive than those bought at older ages.

Compare prices when you compare policies. Ask questions if the policy you are considering is a lot less or a lot more expensive than other policies with similar benefits.

You have the right to request cancellation of the policy at any time and the insurance company must issue a prorated premium refund. If you die during the term that the policy is in force, the insurance company will issue a refund of premiums to your estate.

Health Questions
When you apply for long-term care insurance, you may be asked questions relating to your health status, including any prior hospitalization and nursing home confinements. Each insurance company has its own standards for deciding who is eligible for a policy. If the questions are not answered accurately, the insurance company may refuse to pay benefits, terminate the contract, and return your premium at the time you make a claim. Since the application is part of the policy, check it again when you receive the policy to make sure all questions have been answered accurately.

Using the Long-Term Care Insurance Checklist in the Guide to Long-Term Care will give you a more accurate idea of what your actual policy premium might be.