Questions to Ask About Insurance Policy

If you are getting along in years and have a family history of Alzheimer’s disease, strokes or other debilitating ailments, you should consider long-term care insurance.

These policies, now offered by many big health insurance companies, often cover what no one else will--long-term custodial care for people who are not technically sick but who need help with day-to-day activities.

This coverage can save a fortune for those who need it. But it is no panacea. Policies vary dramatically in both cost and coverage. Some pay for virtually all the needs of a nursing home patient; others have such substantial gaps that the policy is almost useless.

And, generally speaking, these plans are expensive.

Like many other types of insurance, there is no standard fee. Premiums for long-term care insurance differ for each individual. However, your age typically plays a pivotal role in determining the premium.

If you are relatively young, perhaps in your early 60s, you may be able to find coverage for $100 or $200 a year. Premium costs start taking giant steps forward as you get older, even if you remain healthy. Some policies cost thousands of dollars annually.

Although the cost is clearly important, it should not be the only factor to consider when looking at long-term care policies. Coverage terms also need to be closely scrutinized, said Armond D. Budish, a Philadelphia attorney who authored “Avoiding the Medicaid Trap.” Some might believe that they are getting a bargain when they find a low premium, but if the policy coverage is insufficient, that’s money thrown down the drain, industry experts add.

According to Budish, consumers should get answers to several questions before buying a policy, including what the annual premium is and whether it can be hiked or your policy can be canceled. The best policies have a fixed premium for life and are guaranteed renewable, he said.

Some of the questions you should ask:

* What type of care is covered? Long-term care is broken into several categories, including medically necessary care, skilled nursing care, intermediate, custodial and home care. If your policy only covers certain types of care, or care in a particular type of facility, you may be left out in the cold if you find that’s not what you need.

* When do benefits start? Some policies pay immediately, others have waiting periods of up to 100 days.

* How much is the daily benefit payment? Most policies do not cover every nursing home expense. Instead, they promise to pay up to a set amount per day. Often insurers allow the policyholder to chose the amount, which may range between $30 and $120 a day. You need to check out nursing home costs in your area and make sure the policy you buy pays at least half to two-thirds of that amount, according to Budish.

* Are benefit payments indexed for inflation? This can be particularly important if you buy a policy several years before you need it. For example, if you buy a policy today that promises to pay $80 daily, that might cover the bulk of nursing home expenses if you checked in to a home tomorrow. But 10 years from now that same daily benefit may only pay for 50% of your costs if prices rise 5% a year.

* How long do benefits last and are there restrictions on repeat nursing home stays?

* Does your coverage lapse if you move out of state or get sick while traveling?

* Does the policy have a premium waiver option, allowing you to stop paying premiums while in a nursing home without jeopardizing your coverage?

* Can the policy be upgraded--the equivalent of trading your policy in for a newer and, presumably, better model?

* Does the policy restrict coverage for pre-existing medical conditions? If it does, do you have any reason to believe that this restriction would cause you to be denied coverage?

* Are there prerequisites for certain types of coverage? For example, some might not cover nursing home expenses unless you were in the hospital first. Other policies might not cover home care unless you’d already tried a nursing home.

* Does the policy restrict coverage for particular disorders, such as those of “psychological” origin? Budish said this restriction is sometimes used to refuse coverage for those with Alzheimer’s, Parkinson’s disease or for those who are senile.

Consumers should also take a close look at the insurer providing the coverage. Is it a reputable company? Has it been in business long and is it financially sound? Are there company agents nearby, or do you need to make a toll call to clarify questions about your coverage?

It is possible that the answers to all these questions will make long-term care insurance impractical or unavailable for you and your family. If that’s the case, you should consider other steps to protect your assets from catastrophic illness.