The Long Term Care Option

September 12, 2003
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GRAND RAPIDS — As the baby-boom generation moves closer to needing old age assistance and as office-holders scramble to deal with what looks like certain crisis, health insurers are saying, “Hey! Check with us!”

They’re talking about what they regard as the solution to the soaring costs of old age care and the soaring number of people needing it.

It’s a form of health insurance called long-term coverage.

Unfortunately, 20 years ago, most people who were 40-something didn’t want to contemplate that in the late years of their lives they might face nursing home rates rivaling those of a three-star hotel.

Nor did they want to confront some of the unpleasant questions that insurance agents bring up. In fact, chuckles Jim Gilbert, most boomers didn’t want to talk to insurance people at all.

He said that many people now in their 60s, however, suddenly have become interested in the product.

Gilbert, an independent agent with the West Michigan Business Group, 1859 R.W. Berends Drive SW, in Wyoming,is president of the West Michigan Association of Health Underwriters.

He told the Business Journal that long-term care coverage is similar to disability income insurance in that it provides coverage in the form of a daily benefit over a certain benefit period.

He said a myriad of long-term care products are available, but if a typical or average policy exists, it provides a benefit ranging from $100 to $150 a day over a benefit period of two to five years. But he stressed that the variety of long-term care products is vast.

“You can buy life-time coverage,” Gilbert said, “but it raises the price of coverage substantially.”

Too, like a disability policy, he noted that a long-term care policy has what’s called an elimination period, similar to a deductible in auto or household insurance. Basically, the elimination period is that portion of a long-term stay in, say, a nursing home that the insured is able to pay out of his own resources.

The higher the deductible — or the longer the policy’s elimination period — the lower the premium is.

Likewise, as in buying disability coverage, the younger you are and the better your health, the lower the premiums.

Younger buyers trying to take advantage of the lower premium of their age group, he said, should remember ask agents about policies with inflation protection features.

Gilbert said the beauty of good long-term care coverage is that one needn’t worry about relying on taxpayers or the caprices of politicians in order to have access to good long-term care services.

He stressed, too, that such policies can play an important role in estate planning insofar as they can avert the worry about spending down an estate in order to be comfortable in old age.

Gilbert stressed that in his own business, long-term coverage is critical to successful small businesspeople such as farmers who have sizeable property assets but modest amounts of cash.

“I’m acquainted with one case,” he said, “where the farm is worth a great deal. But if the owner had to go into a nursing home and didn’t have good long-term coverage, it would be necessary to sell off the business.”

According to Gilbert, the best long-term care insurance pays a benefit that can be used in a wide range of settings. Gilbert urges people to avoid policies that restrict coverage to only one type of care or that pay a benefit for only certain ailments or illnesses.

In other words, a good policy would have the flexibility to cover either home care or assisted living, or care in an environment in which one requires skilled nursing.

Like any financial product, Gilbert said long-term care coverage is a complex area that can get confusing to the layman.

Among the bells and whistles in the long-term care business, he explained, are incentives such as discounts if both spouses buy policies, and lapse protection to keep a policy from being automatically canceled if you accidentally forget to pay a premium.

Gilbert said that someone who is ready to select a policy ought to seek the counsel of an insurance agent trained in long-term care insurance products.

“It’s a very complex field,” he said. “I don’t know how many companies offer long-term care, and I’d recommend working with an independent agent because they can work with any company to tailor a policy to exactly what you need.”

He said any buyer should look for guaranteed renewable policies — an industry phrase referring to the fact that it can’t be canceled for any reason other than failure to pay premiums.

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