9 Things to Consider Before You Buy

An Interview with Jay Drucker, Vice President, American General Life Companies

Ever notice that people have different approaches to decision-making? Some people like to do extensive research. Some write lists of pros and cons. Some decide by seeking the advice and opinions of friends, family and expert advisors. No one way is better or worse … just different.

When the issue is a life-critical one – one which affects not just us but those we love – what’s important is not how we make the decision but that we actually make one! And make one in a timely manner.

Deciding to purchase a long term care insurance policy to take care of ourselves as we grow older is just such an issue. And while life doesn’t always offer the one perfect choice, there are some guidelines you can use to assess the best long term care insurance solution for you.

Following is an interview with Jay Drucker, Vice President of Accident & Health Insurance, American General Life Companies, to help guide you in making the right long term care insurance decision for you and your family. Jay is a 30-year industry veteran, and he’s passionate about the vital role long term care insurance can play in a sound financial plan.

Q:	Jay, where do we start in deciding on the right long term care insurance policy?
Jay:	The starting point is quite simply, “Should you buy a policy?” Today, we are living longer than our parents or grandparents. So it shouldn’t surprise you that these days more of us may need some kind of care as we grow older. At least 70 percent of people over age 65 will require some long-term care services at some point in their lives.1 So the question you have to ask yourself is: “Will I be one of those?”
Q:	How could I pay for care if I didn’t have long term care insurance?
Jay:	Those who don’t own a long term care policy will either have to self-fund their care or rely on Medicare and Medicaid for some support. However, neither of these two programs pays for anything but the very basics. To qualify for Medicare, you must need skilled or recuperative care for a short time – not the long time care usually associated with cognitive impairments like Alzheimer’s disease. In addition, Medicare does not pay for non-skilled assistance with the activities of daily living like bathing, toileting, dressing and the like. Medicaid, on the other hand, will pay for the majority of long term care services, but there are functional qualifications and financial criteria. Medicaid requires you use your assets first, and it may not cover care received at home. “Buy what you can afford … But buy something. Long term care is an issue that shouldn’t go unattended.”
Q:	So if I have savings, I might need to run through my own money first or, worse, ask my family for financial help, before a state or federal program steps in?
Jay:	Exactly. And don’t forget, there are lots of little expenses for care that really add up … ones that are a drain on your savings as well. It’s important to look for a policy that gives you the option of receiving reimbursements or a cash benefit. The cash benefit will enable you to offset costs associated with having a family member supervise your at-home care, such as your family member’s time away from work or travel costs. “Best advice I can give is to seek out the professional advice of a long term care insurance specialist.”
Q:	OK, from everything I’ve read, I’m convinced that I need long term care insurance, but how do I make the decision on what and where to buy? The choices seem dizzying.
Jay:	I have nine suggestions to help make a smart decision. And by the way, we took these principles into consideration when we designed American General Life Insurance Company’s (American General Life) new long term care insurance policy. 1. Make sure that you can get coverage for home care as well as assisted living and nursing home care. Today more people want to stay in place to receive care. American General Life’s policy, for instance, will pay to train an informal caregiver such as a friend or family member to provide care in your home. It will also pay for some medical equipment or modifications to your home to assure that you can live as independently as possible. 2. Buy a policy that has flexible provisions and gives you a choice of dollar amounts of benefit to buy. This is important because flexible options allow you to customize the policy to suit your budget while still meeting your care expectations. 3. Remember to get inflation protection. If you can afford it, inflation protection is so important. Inflation erodes the buying power of your health care dollar just as it reduces the buying power for food and clothing over time. Health care costs for these services have risen continually over the last years. That means things will be more expensive tomorrow than they are today and without inflation protection your benefits will have lost value over time. 4. Buy a policy that calculates the elimination (or waiting) period using calendar days, not service days. The elimination period is the period of time you need to wait before your benefits begin. The way this period is counted can really matter. For example, let’s say you choose a policy that requires you to receive 30 days of long term care service before you can receive benefits. (That’s a service day provision.) So if you receive care three times a week, you’ll have to pay for that care out of your own pocket for about ten weeks before you meet your 30 service-day elimination period. If you had chosen a policy with a calendar day elimination provision, you would have begun receiving benefits after just four weeks because policies with that calendar day provision count every day you are chronically ill from the day you are eligible to receive benefits toward your elimination period. 5. Don’t buy a policy that makes you go through hoops to be eligible for benefits. This means you should be able to select the shortest waiting period … that’s the period before benefits begin … that you can afford, that you don’t have to receive care or incur costs before benefits begin and that you can qualify for benefits if you can’t perform two of the activities of daily living (ADLs), not more. 6. Seek out a policy that pays a cash benefit. If you choose to have a family member provide care, many policies will not pay benefits. There are many indirect costs associated with receiving this level of care, and a policy that offers cash benefits for this situation gives you added choices in how you receive care. 7. Look for monthly rather than daily maximum benefit amounts. Some policies limit the dollar amount you can receive on any given day. Some days are more expensive than others so a monthly limit is, well, less limiting. 8. Buy what you can afford. Buy the best you can … but buy something. Long-term care is an issue that shouldn’t go unattended. It’s so easy to get ‘analysis paralysis’ when trying to decide important issues like this. There’s a lot to consider. But buying before you need it, at the youngest age you can afford to, is important.
Q:	Those are eight rules to make a smart decision … You promised nine.
Jay:	I’ve saved my best piece of advice for last: Number 9 … Seek out professional advice. There are some great insurance agents out there who understand the policies inside and out and can tailor a flexible policy to meet your needs and meet your budget.
Q:	Thanks, Jay, for helping us make the right decision.

1	U.S. Department of Health and Human Services; National Clearinghouse for Long Term Care Information, 2008; www.longtermcare.gov