Questions To Ask When Evaluating Long-Term Care Insurance Policies

When evaluating long-term care insurance, consider asking a provider the following questions:

Are you licensed to sell long-term care insurance in this state?  Make sure from the start that the person you’re talking with is legally able to sell this insurance product to you. 

What is your company’s rating?  A.M. Best and Standard and Poor’s are two of the most well-known “graders” of insurance companies.  You want to consider a company that has at least an “A” rating or better since that will tell you how financially solvent (dependable) the company is.  Since it is very likely that you will not need to use your insurance policy for decades to come, you want to make sure that the company is financially reliable and will most likely still be in business when the time comes that you need to tap into your policy.  You can find copies of insurance reference guides (which provide insurance company ratings) in your public library.

In what settings will your company pay for care?  It’s best to consider policies that offer you coverage in the most number of settings – i.e. nursing homes, assisted living facilities, community senior centers/adult day care centers, or at home.    

What requirements must I meet in order to qualify to receive benefits?  Every insurance company should clearly state what requirements must be in met in order for them to pay out benefits.  Requirements may include:

  • your inability to perform two or more ADLs (Activities of Daily Living)
  • significant cognitive impairment (i.e. Parkinson’s or Alzheimer’s)
    doctor’s certification that long-term care is required

What preexisting conditions, if any, are excluded from coverage?  Is there a waiting period for any conditions?

What other exclusions or limitations does this policy have (examples might include no coverage for long-term care due to alcoholism or drug addiction, attempted suicide, an act of war, etc.)?

Do you pay for in-home custodial care provided by home health aides (i.e. help with eating, bathing, dressing, etc.) or only in-home skilled care provided by registered nurses (i.e. medication, rehabilitative services, etc.)?

Do you require a minimum length hospital stay before paying benefits for care received in a nursing home?  In an assisted living facility?  With home health care?  It’s desirable to not have a required hospital stay before being eligible for benefits.

Do you require Medicare approval in order to qualify for coverage?  You should not have to demonstrate Medicare eligibility in order to qualify for long-term care insurance.

What is your required waiting period after I need long-term care before I can begin to receive insurance payments to pay for it?  Can I choose a longer waiting period in order to lower my premium?

Do you pay out benefits according to a daily benefit amount (DBA) or monthly benefit amount (MBA)?  If it is a DBA, do you have a maximum number of days or visits per year for which benefits will be paid?  If you pay out an MBA, do you have a maximum number of months for which benefits will be paid?

How do you pay benefits?  Some policies will pay the care provider directly, others will reimburse you for costs incurred that you have paid for, and others will pay out a standard lump sum once you qualify for benefits and the waiting period has passed.

If you pay out only for submitted receipted claims, what percentage of claims that have been filed by policyholders have been paid?  How long is it on average between the time a claim is filed and the time the check is mailed to a policyholder for reimbursement?

Are there limits on the amount of benefits I can receive with this policy either in a given year or during my lifetime?

Do you offer inflation protection with this policy?  If so, what percentage inflation rate do you guarantee to protect a policy holder against per year without affecting my premium?

Is this a guaranteed renewable policy?  With a guaranteed renewable policy you are guaranteed the opportunity to renew your policy. It does not mean that your premium is guaranteed to not increase.  However, the only way that your premium could increase is if the insurance company raised the premium rate for all of the policyholders in your class, holding your same type of policy.   

What policy lengths do you offer?  You want to have the freedom to select from policies that offer coverage for a variety of number of years (i.e. 1 year, 3 years, 5 years, lifetime)

What is the monthly premium with this policy?  Can I pay the premium in one annual lump-sum or in any other format other than monthly?

Under what conditions can my policy premium be increased?

Am I required to continue paying my premium during the period I receive benefits?

Is there a waiting period after I cease receiving benefits until I can again receive maximum benefits?  If you receive benefits for a condition, regain full mobility and do not require additional care, and then have a repeated injury or illness, you want to make sure that you can receive full benefits for the same type of care again.

What happens if I am late or miss a premium payment?

Do you offer third-party notification so that someone I elect can be notified if I miss a premium payment?  If your spouse, dependent or financial professional assists you with bill-paying, it can be helpful to have a third-party notification system.

Do you offer nonforfeiture benefits that allow me to maintain a lower amount of coverage if I miss a premium payment?  Nonforfeiture ensures that you will still retain partial coverage even if you lapse in making your premium payments for the life of the policy.

Can I upgrade to another policy with increased benefits at any time?  What is the process to do that?

Are the benefits I receive under this policy tax-free?  They should be. 

Would receiving benefits under this policy affect my Social Security benefits?  If you are currently receiving Social Security benefits your long-term care insurance benefits should not affect that status.

Is my premium payment tax-deductible as a medical expense?  Your agent might be able to answer this, or you may need to consult a tax professional.  If you itemize your tax return (meaning that you do not take the standard deduction), your long-term care insurance premium may qualify as a medical expense that can be deducted from your income taxes.

If I am having a problem with my policy or a service provider, what is the process for filing a complaint? 

Under what conditions could my policy be canceled?

Is there an initial trial period during which I can cancel or return the policy with no further obligation?

In addition to getting satisfactory answers to all of the above questions, you should not feel pressured to buy or sign anything or to make a hasty decision on purchasing a policy.  Ask to take printed materials home with you so that you can review them and share them with any friends or family members that you would like to involve in the decision.