With a non-forfeiture clause, you would get back some of the money you already paid if you later cancel the policy. However, that benefit can increase your premiums by 10 to 100 percent, according to data from NAIC.
Younger policyholders may also want to consider inflation protection, as the cost of home or nursing home care will likely increase by the time by the time they need it. NAIC data shows that inflation protection can add 25 to 40 percent to the premium, but without it, you may find that your policy only covers a portion of your actual costs. "Some people pay their policies for 20 years, and they go into a nursing home and find out the policy pays out only $75 per day," explains Tom Burke, a spokesperson for the American Health Care Association, an association of long-term and post-acute care providers.
If you purchase a state Partnership-qualified policy, then your policy must provide inflation protection. Policies through the Partnership Program are also tax-qualified, meaning if your annual premiums and other out-of-pocket medical expenses exceed 7.5 percent of your adjusted gross income, they are tax-deductible.
The Partnership Program (available in most states and designed to make long-term care insurance more affordable for middle-income individuals) provides another key benefit: asset disregard, which helps consumers qualify for Medicaid to cover additional care beyond their policy limit without spending all their assets. "Every dollar that the policy pays is a dollar that you don't have to spend to qualify for Medicaid," explains Weisbart. "With a Partnership policy, if the policy pays out $50,000 in benefits, you can keep that $50,000 in assets because the policy has saved the state's Medicaid program from spending that money."
Cost is one of the main deterrents to purchasing long-term care insurance. When considering a policy, it's important to make sure you can afford the monthly premiums, says Dee Mahan, director of Medicaid advocacy at the consumer healthcare nonprofit Families USA. "I would really caution people who are lower-income on whether this is something they'll be able to swing after they stop working. Check with the Partnership programs in your state first."
But as Burke points out, "affordability is not just what you're paying now, but whether you can afford to do so without insurance and run the risk of $60,000, $80,000, or more per year or longer." Increasing the elimination period (the time period when the individual pays for care before the insurer starts making payments) or benefit period can reduce premiums, but those also reduce your coverage in the event that you need it.
Specific policies vary, so consumers should make sure the policy covers the type of care they would want before they buy. "Some policies cover more home care, and some cover nursing home care," says Mahan. "Ask yourself: Am I going to need assistance only at home? Do I absolutely not want to go into an institution?"
Don't succumb to high-pressure sales, Praeger cautions. "That's usually a red flag," she says. "Check with your state's insurance department. You can check to see when the last rate increase was and look at the complaint ratio. You want a low complaint ratio, which tells you how easy it is to get a complaint paid."
Thinking about needing this type of care may not be pleasant, but it's necessary. "Most people prefer not think about it, but they're creating a potential financial disaster and maybe a personal disaster," as Weisbart says. "The issue is financial but it's also psychological. The good news is we're learning a lot about nutrition and medicine so we can live a long time. The bad news is there might not be a light at the end of the tunnel unless we've made arrangements."