The Bogleheads' Guide to Investing

If you go shopping for long-term care, here are some of the features a good policy will contain: The daily benefit should equal the current daily cost of a nursing home in the area where you live. The higher the benefit, the higher your premium will be. Inflation protection of 5 percent per year, compounded to keep your daily benefit current with rising costs of care, should be built in to the policy. The benefit payment period should be at least three to five years. A lifetime benefit payment period is best. An elimination period should be affordable. The elimination period is like a deductible. The longer you can pay out of pocket before the benefits kick in, the cheaper your premium will be. Medicare will pay for the first 25 days. One hundred days is a good elimination period for most people. Coverage cannot be canceled for any reason other than for failure to pay premiums. The policy should cover both skilled and nonskilled care. Benefits should also cover home health and assisted living care without requiring a prior hospital stay. There should be no exclusions for particular illnesses such as Alzheimer’s disease and dementia. Benefit triggers specify when coverage begins. The inability to dress or bathe are examples of benefit triggers. In the best and most expensive policies, proof of cognitive impairment such as Alzheimer’s is a benefit trigger even if the person is able to dress and bathe himself. Waiver of premium, which allows you to stop making payments when coverage begins. Your annual premium cannot be raised unless it’s raised for every policy holder living in your state. The policy is tax qualified. With a qualified policy the premium may be tax deductible and any benefits you receive will not be subject to federal taxes. It’s a good idea to purchase long-term care before age 60. If you wait until age 70, your premiums will be about 2.5 times higher than at age 60. Furthermore, the longer you wait the greater the risk you will contract a chronic illness and become uninsurable.