We get asked a lot about buying long-term care insurance by readers, and we try to be cautious in our advice. Even though long-term care insurance can be a great option to help finance eventual long-term care there are plenty of pitfalls that would-be long-term care insurance policyholders can fall into as well. We have heard all too many stories about people paying into long-term care insurance policies for years, even decades, only to have their claims denied when they finally need care, and putting their families into huge finance holes.
Want an example of how a long-term care insurance policy can go wrong? A lawsuit has been filed against the the Senior Health Insurance Company of Pennsylvania over a long-term care insurance policy, and sadly, the details are not uncommon:
It alleges that SHIP tried to avoid reimbursing policyholders for long-term care by ignoring or taking an unreasonably long time to respond to claims; requiring unnecessary paperwork and medical examinations, and requiring that the caregivers have licenses in violation of company policy and California law.
The suit, which seeks class-action status, was filed on behalf of Dr. William Hall, 78, of Upland. Hall, a retired chief of medicine at a California hospital, bought a long-term care policy in 1994 and submitted claims in 2010. SHIP refused to reimburse all but 20 percent of his expenses.
“He immediately ran into a brick wall” and was forced to pay tens of thousands of dollars for his home care, which depleted his savings, Rosenfield said.
“My Dad bought this policy to spare his children some of the time and expenses that many of our parents require when they get older, but SHIP has only drained my family’s resources,” his son, Eric Hall, said in a statement. “Because of SHIP, my family has spent more time and expense on his care than if he had never bought the policy in the first place. It has been an uphill battle.”
If you have started considering private health insurance for yourself or your parents, here are some important things to think about:
Remember, the policy is long-term both for you and your insurer. It is very important to consider the stability of both the insurer and the policy’s premiums over the long-term before you put your money down on a policy.
In addition, we do suggest that you not buy a long-term care insurance policy until later in life. Many insurance agents will begin pushing the hard sell to buy a policy as early as 40, but it really doesn’t make sense for most people unless you have a chronic condition that may require earlier care. Although premiums are lower the younger you are when you first purchase the policy, buying that early will most likely result in decades of payments before you have any need to call upon your policy. Your premiums could be rising for decades before your ever need the policy, and if your insurer ends up pricing your premiums to a point you can’t afford them any more, you could end up in deep doo-doo.
Also, a long-term care insurance policy purchased too early may not cover new models of care that are likely to develop in the interim. For example, many long-term care insurance policies which were purchased 20 years ago did not cover the expenses of assisted living facilities, because those facilities did not develop until relatively recently. Buying a policy only 5 or 10 years ago may result in higher premiums, but it’s much more likely to give both you and your insurer a realistic idea of the costs of your long-term care and the long-term care that you need.
Have your bought a long-term care insurance policy? Tell us about it!
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