Long-term care policies aid human costs as well

Question: What is long-term care insurance?

Answer: Long-term care insurance is like buying money for future delivery at a discount to help you lower the financial cost of caring for a loved one when they need custodial help with prolonged physical or cognitive impairment.

Q. What are some of the considerations to think about before deciding whether to buy an LTC insurance policy?

A. Do I want to leave something for my children, or do I want to spend everything for my care in my later years? Do I want to be a burden on my family? Are my children willing to disrupt their busy lives to care for me 24 yours a day for what might turn out to be years?

Q. At what age should someone consider buying an LTC insurance policy?

A. Realistically, people can generally buy it at any age, but usually most are past 50 when it becomes more of a reality.

Q. What is the average premium for an LTC policy? How does that compare with what someone who is uninsured would typically pay out of pocket if they had to pay to live in an LTC facility?

A. LTC care premiums are about 10 percent of the cost of monthly care. The average cost of a long-term care stay is about $10,000 a month. LTC insurance is not cheap, but the alternative is far worse. People think they are saving money by not buying insurance, but they sometimes end up paying a later price and only enjoy a false economy.

When there is no insurance, there is another cost that most people overlook, and that is the human cost to relationships between the parent and caregiving child or between the siblings who have to share the burden of caregiving. The most common situation is where the siblings don’t share and the burden falls entirely on one child, usually a daughter.

Q. What services are typically covered by an LTC policy?

A. It will pay for nursing home care, but more importantly it will cover care in your home. Some of the services include physical or occupational therapy. Home health aides, visiting nurses and adult day care can help you stay in your home, but only to the limits of your policy. People may not be adequately covered. They need to realistically estimate their long-term expenses with inflation uppermost in their mind, or the difference will have to be paid out of pocket.

Q. What are the typical triggers that allow a policy-holder to begin collecting benefits on an LTC policy?

A. Coverage typically starts when you are unable to perform without substantial assistance from another person, or perform two or more of the activities of daily living because of a loss of functional capacity which is expected to last at least 60 days. Activities include bathing yourself, continence, dressing yourself without help and eating on your own. Other triggers are toileting, which means getting to and from the bathroom and getting on and off the toilet by yourself, as well as getting in and out of bed or a wheelchair. Insurers also consider cognitive impairment, which means you require substantial supervision to protect yourself or others from threats to health and safety.

Q. What independent resources are there for consumers to evaluate companies that offer LTC insurance before buying a policy?

A. The National Association of Insurance Commissioners puts out an independent guide that can help you understand long-term insurance and the insurance options that can help you pay for LTC services. Your insurance agent is required to provide you this guide to help you make this important decision.

Q. What are some other tips for someone considering buying an LTC insurance policy?

A. The insurance company behind the LTC contract should be highly rated financially, and the agent helping you should have experience in guiding you to arrive at the proper amount of coverage. Underinsuring yourself is almost as bad as having no insurance at all. The younger you are, the more inflation will erode your insurance coverage, so make sure you add the inflation rider to your policy. Asking your children if they would be willing to look after you is not a realistic option if you have other options.

Interviewed by Alan Yonan Jr. "Akamai Money" seeks out local experts to answer questions about business in Hawaii. If you have an issue you would like us to tackle, please email it to business@staradvertiser.com and put "Akamai Money" in the subject line.