There is no doubt about it. Long term care insurance is complicated and can be confusing. Most companies offer a potentially dizzying array of benefit options and riders. The good news is that this means that it is possible to tailor a policy very specifically for your needs and situation. The bad news is that these plan differences can make it very difficult to compare policies and determine which one really is the best value.

While many people are reluctant to speak with an insurance agent, in the case of long term care insurance, an hour spent with a good agent can save you hours of research time and help insure you have the best plan for your needs.

The following factors are among those that will affect your plan design.

• Your current income and expenses

• The cost of nursing homes and home care providers charging in your area

• The quality of LTC facilities and services in your area

• Your marital status (Would caring for you put a financial/physical burden on your spouse?)

• The amount of savings currently set aside to pay for potential long term care expenses

• The length of time you could pay for care out of pocket before beginning to liquidate your assets

• Your family health history

• Your age (Affects type of inflation protection you need)

• Your willingness to go on welfare

• Your family situation

• Your desire to leave an inheritance to your children

• Your desire to stay at home if you needed LTC vs. moving to a facility



Evaluating a plan:

The following are the key features to look at when evaluating a plan.

Premium: The premium needs to be affordable without significantly affecting your lifestyle or depleting your assets. A general rule of thumb is that the premium should not exceed 7% of your income or 5% of your assets (excluding your home).

Maximum daily or monthly benefit: This is the maximum amount the policy will be in one day (or month). Be aware that if average nursing home costs are $200 per day in your area and your policy pays $100, you will be responsible for paying the difference out of pocket.

Benefit period/amount: Most LTC policies also have a total a maximum amount that they will pay. This is typically expressed in days e.g. a four year, $200/day plan will pay at most $200x 4 (years) x 365 or $292,000. A limited plan is significantly cheaper than an unlimited or lifetime plan.

Elimination Period: The elimination period is the deductible for long term care insurance. Typically 30, 60 or90 days, it represents the number of days you need to pay yourself before the policy begins to pay benefits.

Inflation protection: An inflation rider increases your benefits by a set amount per year to account for inflation. Inflation riders typically add either a fixed amount per year or are calculated on a compound basis. A compound inflation rider is the most expensive option but is important if you are buying at a younger age.



Policy Type:

Indemnity or Reimbursement: Some insurance policies will give you a cash amount per day you qualify for benefits (indemnity). Other policies reimburse your expenses. An indemnity plan provides more flexibility but is also more expensive. You might want to speak to your agent about policies that provide a combination of payment options.

Comprehensive vs. Facility only: This option refers to where the care is provided. A comprehensive policy will cover home care in addition to nursing home and assisted living facilities.

Company:

Probably in no other line of insurance is the company you choose more important. You may very well not make a claim for years after you purchase your policy, so you want to be sure you're investing in a company you trust. Perhaps more importantly, unlike say auto-insurance, you're not going to be in the position to change companies if you are unhappy with the way they pay claims. (At the point that you have developed a chronic illness that requires LTC, you are unlikely to recover to the point that you could affordably re-apply for insurance with another company.)

• Years in business: Look for a company that has been providing LTC insurance for at least 7 years and has developed a history of reliably reserving for and paying claims.

• History of rate increases: No company provides guarantees against rate increases, but look for a company with a good track record.

• Rating: Ask for the ratings from AM Best, Moody's and S&P for any insurance carrier you are contemplating purchasing a policy from.