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Long-Term Care Insurance

Long-term care isn’t cheap – and it’s getting more expensive each year. This type of policy can help cover some of the costs people fear the most, such as skilled nursing – either in a nursing home or at home, as well as help with activities of daily living (ADLs) such as bathing, dressing, and eating.

While long-term care insurance (LTCI) policies can have their advantages, they are a high-risk gamble – and many people have been burned by not understanding the fine print, and by insurance companies going under (even more so lately).

Read this overview to get a working knowledge of long-term care insurance, but gather as much information as possible before your parents (or you, for that matter) sign up for a policy. Find an agent you can trust, but it’s also a good idea to have an attorney specializing in elder law look over the policy before you sign. In addition, ask the insurance agent for any references of clients or their family members who have purchased the same policy and are now receiving benefits. Ask them if the policy is meeting their expectations or if they’re disappointed in the results.

Who Can Benefit the Most From LTCI?

Those in the "younger" crowd. People in their 60s – usually around 65 – have the best odds of benefiting because the older your parents are, the more expensive the premiums. Pre-existing conditions can drive up the price, too. If your parents have a good health history, LTCI can still be a positive choice if they’re in their early 70s.

Those who have a big nest egg. If your parents have liquid assets between $200,000 and $1.5 million and/or a sizeable retirement income, they may be good candidates for LTCI.

Those without family who can accommodate them. If you or other family members aren’t able to provide a room in your home or look after them, LTCI might be the right choice.

Keep These Things in Mind When Looking For a Policy

High financial ratings. You want a company that’s still going to be around in 10 or 20 years. You can also check online ratings from A.M. Best, Moody’s, Standard & Poor’s, or Weiss (at www.ambest.com ; www.moodys.com ; www.standardandpoors.com ; and www.weissratings.com ). The first three services are free. Weiss charges $7.95 for each company rating online and $15 by phone. Only consider insurers that are rated in the top two financial-strength categories by at least two of these services.

Flexibility. Look for a policy that requires a person be unable to perform no more than two activities of daily living. Make sure bathing and dressing are included; these are commonly the first things people need help with. Also look to see that assisted-living facilities, as well as nursing homes, are covered. (Some policies require that a staff member be on the premises 24 hours a day, a physician must be on call, or the facility must be able to supervise medications.) A home-care benefit should include adult day care, hospice services, and respite care for the family caregiver.

Inflation protection. If your parents or loved ones are relatively young, go for the longest period of inflation protection.

Diligence is key when it comes to deciding if LTCI is a viable option for your parents or loved ones. This is not a place for short cuts or skimming. Make sure you understand every aspect of the policy before your loved one signs anything.