The Dolans' Guide to Long-Term Care Insurance: Your Top 10 Questions Answered

Question 5: When does my LTC policy kick in?

Medicare offers limited coverage for nursing home stays. It will pay, on average, for up to 27 days of nursing home care after three consecutive days in the hospital.

If your parent is homebound and needs nursing services on an intermittent basis, Medicare will pay up to 35 hours of home health visits. Once your parent's condition improves, he or she may be ineligible for coverage.

Dolan Smart Money Move: If you can afford to pay some of the care costs after your Medicare coverage is exhausted, consider buying a long-term care policy with a 90-day or a 100-day waiting period rather than a 30-day waiting period. You'll save about 10% in premiums.

Question 6: How long will I need coverage?

The period in which you or your parents are covered is called the "benefit period." You can buy a "lifetime" policy if you believe they might spend more than five years in a nursing home. But that's very expensive - and usually unnecessary. Again, the average nursing home stay is three years; the likelihood of staying longer than that is just over 10%. Most nursing home admissions are for relatively short periods of time - less than three months.

Dolan Smart Money Move: Buying a policy with a four-year benefit period that covers nursing homes, home care, and assisted living is generally adequate. Don't buy a shorter benefit for home care - home care is seen as an alternative to taking people out of their homes and placing them in nursing homes.

Question 7: Will the policy keep up with rising costs?

It will if you buy a policy specifically set up to keep pace with rising health care costs, with an "inflation-protection" rider that increases the daily benefit amount. In general, the best rider is one that promises 5% more per year compounded beginning the year after you buy the policy.

That being said, there may be cheaper options better suited to your specific circumstances. For example:

• If you or your parents are in their seventies, a simple 5% inflation adjustment is sufficient because they'll likely need the benefit payout sooner.
• If your parents are in their eighties, they should probably forego inflation protection, because they won't likely live long enough to justify the extra expense for inflation protection.
• If you currently have serious medical problems but are insurable and think you might need care sooner rather than later, consider buying a very high daily benefit with no inflation protection. That way, you'll have more insurance coverage up front and that's better than waiting 14 years to have your daily benefit double (with 5% compound inflation).

Question 8: When should the benefits begin?

In determining this, insurance companies look at your ability to perform typical activities of daily living, or ADLs, also known as "benefit triggers."

Policies pay out benefits when you are unable to perform at least two of five or six ADLs, such as inability to bathe. (You cannot choose which ones trigger your policy.)

Question 9: Will the policy lapse if I can't pay premiums?

You may choose non-forfeiture protection that provides some LTC coverage even if no one in the family can pay the premiums. The shortened benefit period option allows you to receive benefits if you pay premiums for a certain number of years, usually five to seven years.

Policies also pay benefits when your doctor has determined that you are "cognitively impaired," meaning your short-term memory is failing and it is necessary to have someone supervise you for your own protection.

Question 10: What is the "best" long-term care policy?

There's no easy "one-size-fits-all" answer to this question, so you'll have to do some research and consider your own circumstances. Ask your insurance salesperson to provide you with an Outline of Coverage and a Policy Brochure for several companies. Good salespeople for these policies will have C.I.T.C. (Certified in Long-Term Care), C.S.A. (Certified Senior Advisor), or C.F.P. (Certified Financial Planner) designations, and will have sold a minimum of 50 of these policies.

Don't rush into a decision! Comparison-shop different benefits and premiums, then pick the policy that fits your needs and pocketbook.