According to the American Association for Long Term Care Insurance, the cost of a policy that pays benefits for an unlimited amount of time is only about a third more expensive than a standard policy that pays for just three years of care. You can even pay for nearly a third of that added cost by increasing the elimination period on your policy from the standard 90 days to 180 days. Now you’re beginning to think like an economist — insure against the big losses you can’t afford and don’t sweat the small stuff.
In spite of paying expensive premiums for many years, some individuals who are “covered” by long-term care insurance policies are surprised to find their claim denied by their insurance company. If you look at the fine print of a policy, you will find that eligibility is generally determined by one’s inability to perform certain “activities of daily living.” These include bathing, continence, dressing, eating, toileting and transferring (moving from one place to another). Before they pay benefits, most insurers require a physician to certify that you are unable to perform two or more of these activities, although some policies specify an even greater number. To make things even more complex, many insurance companies will not pay unless you need hands-on assistance to perform an activity rather than stand-by assistance.
Bottom line, if you have long-term care insurance, look hard at its limitations and your own financial situation before you decide to continue paying its premiums (particularly if rates increase). If you don’t have such insurance, carefully consider whether its likely benefits are worth the costs.