Long Term Care Insurance Considerations

By Compuquotes Team on April 21st, 2008

Long Term Care

As the population ages, long term care insurance is a burgeoning business. Unfortunately, it's also one that's ripe for scams. Many people fear the possibility of losing their physical and financial independence after retirement, and buy long term care insurance to protect their independence in the future, and-they hope-ensure they don't become financially dependent on their children. Unfortunately, these fears make many people targets for long term care insurance scams.

One of the most significant problems is that long term care insurance is a little more complicated and less well-known than many other types of insurance. A lump sum life policy is a simple thing: you insure yourself for $100,000, for example, and your family gets a $100,000 lump sum payout if you die: it's easy to understand, and there are few ambiguities involved.

Long term care insurance is entirely different. With this type of insurance you pay an annual premium, and if you make a claim, you are paid a daily benefit to cover the costs of long term care. If you buy a policy that provides $200 a day in the event of a claim, your policy is worth $200 a day for as long as you have it. It sounds simple, but unfortunately it's not.


Inflation is one important reason why long term care insurance isn't as simple as it sounds. The problem is two-fold:

  • 1.Inflation can render long-term care insurance worthless in the long run.
  • 2.Inflation protection increases premium costs by a significant margin.

This means insurance agents tend not to do the 'hard sell' on inflation protection, because it increases premiums to the point where many people might balk at buying the policy. Buying a $200 a day policy now doesn't guarantee you $200 worth of long term care a day in the future. At an inflation rate of 4%, your money is worth up to 45 percent less in only fifteen years. Inflation protection will increase your premiums considerably, but without it, the insurance is all but worthless.

What's Covered? How do you Claim the Benefits?

People who buy long term care are less likely to understand what their policy covers when they buy it. Many people aren't aware of what restrictions are in effect on their policy until they make a claim, and by then it's too late.

Another issue is that of qualifying for the benefits. In all policies there are criteria that must be met in order to be eligible for a claim. These might include not being able to perform certain normal daily activities, or being mentally impaired, for example.

Finally, don't buy policy without understanding how to make a claim. Most insurance companies have strict requirements here, too. For example, many require you provide written notice of impairment within thirty days of the impairment occurring. Failure to provide it means your claim is invalid.

How to Protect Yourself

The most important way you can protect your self is a simple one: don't buy a policy unless you're 100% sure of these kinds of details-and beware of an insurance agent who glosses over them in their effort to sell a policy.

Take the time to compare policies from different agents and companies, and to decide if Long Term Care insurance fits your individual needs.

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