Aging presents plenty of opportunities, from time to pursue your interests and passions to the expansion of your social circles. You may also face some challenges, especially as you make decisions concerning your long-term health and care needs.
Whether you’ve already started planning or are just beginning to consider what your future might look like, understanding long-term care options is essential to protecting your health and giving yourself peace of mind. You’ll want to balance your current situation with your future needs — which is where long-term care insurance (LTCI) can come into play.
We’re answering questions about whether long-term care insurance is worth it, which prohibited provisions you should look out for, and how you can strategically select a long-term care option.
What Is Long-Term Care Insurance?
Long-term care insurance (LTCI) is intended to cover the costs of care as you age, particularly any future needs around basic daily activities such as dressing, eating, and bathing.
LTCI isn’t a typical health insurance policy. As a specialized form of coverage, it provides a daily cash amount that can be used to pay for necessary care-related services, bridging the gap left by Medicare or traditional health insurance. Depending on the policy you choose, these services can include personal care, adult day services, assisted living, memory care, respite care, and more.
As people live longer due to advances in medical science, the need for long-term care grows, increasing the cost of health care. This corresponds with a rise in the cost of LTCI and the complexity of the provisions and riders that various policies offer. The cost will depend on a number of factors, including your:
- Coverage amount. If you choose more coverage, including some optional riders we will discuss later, your premiums will be higher.
- Health. Your current health will factor into your premium costs. Also, your cost may be higher if your health risk is higher — for instance, due to preexisting conditions or family health history.
- Age. The younger you are when you purchase an LTCI policy, the lower your premiums will usually be.
What Are Prohibited Provisions in Long-Term Care Insurance?
A provision is a clause in an insurance policy that clarifies the terms and conditions of your coverage. Provisions detail what is and isn’t covered, such as types of care, duration of coverage, exclusions, eligibility requirements, and more. These provisions limit the insurer’s obligation to pay; if the policy condition isn’t met, the insurer will deny the claim.
Provisions are a normal part of any insurance contract, from car insurance to health insurance. Some provisions could lead to unfair denials of claim — these are prohibited provisions, which are regulated or outright banned by law to prevent you from being put at a disadvantage and left vulnerable when you need care the most. Prohibited provisions in long-term care insurance can include unreasonably restrictive eligibility requirements, exclusions for preexisting conditions, and lengthy waiting periods. Insurance companies are also required to offer certain riders or optional add-ons to your contract to help ensure your policy doesn’t leave you in the lurch.
If you’re considering an LTCI policy with provisions that are vague, restrictive, or don’t accurately account for your possible care needs, you might end up paying more out of pocket than planned.
What LTCI Provisions and Riders Should I Know About?
When considering LTCI, be sure to understand the provisions and riders that come with the policy you choose. These additional options will impact your policy’s flexibility and cost.
Inflation Riders
With an inflation rider, your benefit levels increase to cover changes in long-term care service costs. The costs of long-term care services — whether they take place in your home or in a community — tend to rise with inflation. Without an inflation rider, your policy benefits might not keep pace with these changes. Although this option can raise premiums, the investment helps ensure sufficient benefits in the future.
Nonforfeiture Benefits
Because life is unpredictable, you may need to cancel your LTCI or be unable to pay the premiums. A nonforfeiture benefit protects you by providing a guarantee you’ll receive some kind of benefit if the policy is canceled, either by you or the insurance company.
You may be eligible for one of two types of nonforfeiture benefits: a refund or reduced coverage. If a refund is an option, the insurance company returns a portion of the premiums you’ve already paid based on how long the policy has been active and the terms of your contract. If reduced coverage is offered, you may be able to lower your benefits without having to make further premium payments.
Free-Look Period
When you first enact your LTCI policy, you should fully review the provisions, benefits, and terms. If you decide the policy isn’t the right fit, the free-look period is your legally guaranteed 30-day window to cancel the policy and receive a refund on your premium payment.
Renewability
A policy with the terms “guaranteed renewable” or “noncancellable” means that the insurer can’t cancel or decline to renew your coverage as long as you pay on time. As you age and continue to pay your premiums, you’ll experience the peace of mind of knowing that your policy will remain active and you won’t lose your benefits.
Convertibility
You may be able to convert existing life insurance into an LTCI policy — an option to consider if you already carry life insurance but are now looking for ways to cover your long-term care needs. This conversion means you can change your existing life insurance coverage for an LTCI policy without going through the underwriting process again. Converting the policy often provides a better return than simply cashing it out because you can use the accumulated value of the life insurance to gain more affordable LTCI coverage.
How Can I Evaluate Long-Term Care Options?
Is long-term care insurance worth it? Which prohibited provisions in long-term care insurance are most pertinent to your situation? Careful planning and a thoughtful approach are key to navigating your options.
1. Work with a qualified insurance agent.
A qualified, knowledgeable agent can provide guidance, explain the details of different policies, and compare options from various providers. Choose a licensed agent with specific experience in long-term care insurance so they understand the nuances of LTCI policies. Plus, insurance agents are required by law to provide an outline of coverage when discussing LTCI, which summarizes your key policy features. Ask for and review this document carefully before making any decisions.
2. Take your time and read the fine print.
With all the options available, you may feel rushed or overwhelmed during this process. Taking your time and reading the fine print will help you avoid surprises down the road. Focus on the benefit amounts and limits, waiting periods, and policy exclusions as you review any potential policy.
3. Understand the LTCI policy’s exclusions.
Every LTCI policy will outline a list of specific situations and conditions insurance won’t cover. Understand what exclusions your policy outlines and how they will impact your coverage. LTCI exclusions to keep an eye out for include:
- Preexisting conditions. Policies may limit or exclude coverage for preexisting health conditions, but certain laws (e.g., the Affordable Care Act) limit how much an insurer can exclude.
- Types of care. The policy may exclude specific types of care or care in certain locations, such as unlicensed communities.
- Cognitive or behavioral issues. Your policy may exclude care for cognitive impairment such as Alzheimer’s disease and other dementias.
4. Choose your daily benefits strategically.
Select a daily benefit appropriate for the geographical area where you’re likely to receive care. Long-term care costs vary across the country — for instance, care in Los Angeles will cost more than in Des Moines. If you live in an area with a higher cost of living, you’ll need to choose an LTCI policy with a higher daily benefit. If you want an idea of the cost of care in your city, use a cost calculator.
5. Consider alternatives to LTCI.
Long-term care insurance isn’t the only option when planning for future care needs. Membership programs exist that not only provide coverage for long-term care but also help you here and now. WellAhead — A WesleyLife Well-Being Experience empowers you to live independently at home while enjoying programming designed to help you stay healthy. Plus, the program ensures that if you need an enhanced level of care at some point, you can access it immediately from WesleyLife at no cost other than your membership and monthly fees.
Want to learn more about the benefits of WellAhead and how it can preserve your well-being now and in the future? The Complete Guide to WellAhead provides all the information you need.
