The Devil Is In The Details….Alternative Long Term Care Policies

Lately, the marketplace has become overrun with life insurance and annuity policies that include a long term care benefit.   As traditional long term care policies jump in cost overnight, families are looking for affordable alternatives.

My comment related to these policies is this:  If it is too good to be true, sometimes it really is … too good to be true.

long term careIf you are going to consider these policies as alternatives to traditional long term care insurance, here are some things you will need to know…

There are two types of riders that insurance companies use to provide this benefit.  They are a Long Term Care (LTC) rider and a Critical and Chronic Illness rider (CCIR).

The LTC rider pays when you meet the basic requirements of the policy, which usually means you can’t perform two (2) of the six (6) defined activities of daily living (ADL).

CCIR riders also kick in when you cannot perform two (2) of the six (6) defined ADLs.  However, the illness or impairment must also be a permanent condition.  So, benefits can be declined even if you meet the basic requirements.

Remember to make sure that you know which type of benefit you are buying or getting for free.

Don’t forget to ask how your benefits are calculated.  Are they indemnity benefits, which is a benefit that pays LTC benefits regardless of your LTC expenses?  Are they reimbursement benefits, which is a benefit that requires you to incur an expense before you receive any money from the insurance company?  Ask the company to calculate exactly what the benefit is going to be.  Don’t take the agent’s word for it.  This can be a complicated formula.

Some of the riders are free and some cost a small fee.  Keep in mind that insurance companies never give anything away for free.  If the benefit is advertised as free, you are paying for it through higher internal fees, a lower rate of return or lower than expected benefits.

On the other hand, some policies allow you to purchase additional benefits beyond the basic benefits offered by the policy.  Seriously consider this option.  It is often a good deal.

Always remember that LTC and CCIR riders are an added benefit.  Make sure that you are buying the insurance contract for the right reason and not just for the extra benefit.  You may find that it is not such a good deal in the end.

If you want more information about this topic, please give our office a call at 866-296-8156 or 215-968-1755.