What to know when buying Life Insurance

When to Purchase
As with most kinds of personal insurance, the younger you are when you purchase long-term care insurance, the lower your premiums will be. Premiums generally don’t increase with age, unless an insurance company raises them for a whole class of policyholders at once. When you consider that 40 percent of those receiving long-term care are under age 65, you should at least give some thought to buying coverage when you’re still relatively young. Doing so should allow you to lock in a low rate while providing you with coverage that may be needed sooner than you think. Also, be aware that most companies won’t sell individual policies to people under age 18 or over age 84.

When you apply for a policy, you’ll be asked to fill out a medical questionnaire, and probably undergo a check-up with a doctor. This helps the insurance company find out about any existing health issues (known as Òpreexisting conditionsÓ) that make it more likely that you’ll one day need long-term care. Preexisting conditions may make coverage more expensive, and the insurance company may choose not cover you for these conditions during your first six months of coverage.

Benefit Amount and Duration
Most long-term care policies are set up as ÒindemnityÓ plans, which means they pay a fixed dollar amount for each day you receive care. Policyholders usually have a choice of daily benefit amounts ranging from $50 to $300 or more, and can also choose the length of time that benefits will be paid. Long-term care policies generally limit benefits to a maximum dollar amount or a maximum number of days and may have separate benefit limits for nursing home, assisted living facility, and home health care within the same policy. For example, a policy may offer $100 per day up to five years of nursing home coverage (many policies now offer lifetime nursing home coverage) and only up to $80 per day up to five years of home assisted living and health care coverage.

Inflation Protection
Because long-term care prices are rising steadily, the benefit you buy today may be inadequate tomorrow. By purchasing inflation protection, your policy benefit will automatically increase each year at a specified rate (such as 5 percent) compounded over the life of the policy.

Elimination or Deductible Periods
These terms refer to how many days you must spend in a nursing home or how many home health visits you must receive before benefits begin. Most policies offer a choice of deductible from zero to 100 days. The longer the elimination or deductible period, the lower the premium.

Almost all long-term care policies are guaranteed renewable. That means that they cannot be canceled as long as you pay your premiums. However, companies can raise premiums as long as they raise them for an entire class of policyholders. The renewability provision, usually found on the first page of the policy, outlines under what conditions the company can cancel the policy or raise premiums.

Nonforfeiture Benefits
This feature allows you to drop your coverage and still receive a portion of the benefits. Nonforfeiture benefits may be received two ways, depending on the policy and option you choose. ÒReturn of premiumÓ provides a cash payment that’s a percentage of the total premiums you have paid. With a Òshortened benefit period,Ó you still receive coverage after you’ve stopped paying, but with a reduced benefit period or amount.

Waiver of Premium
This provision allows you to stop paying premiums while you are receiving benefits. Your policy may contain restrictions on this feature, such as requiring you to receive care for a certain number of days or sessions before premiums are waived.

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