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LONG TERM CARE - PAGE 14

• Shoppers Guide: Companies and agents are required to give a copy of the long-term care insurance shoppers guide developed by the California Department of Aging to each person who applies for a long-term care insurance policy. This guide is titled “Taking Care of Tomorrow” and covers many issues related to long-term care, as well as long-term care insurance.

• Checklist and Counseling Information: Agents are required to leave a number of documents with you when they sell a long-term care insurance policy. Among the items you should get is a copy of a “Personal Worksheet” that helps you understand some of the issues related to purchasing long-term care insurance, and the name, address, and local phone number of the HICAP office nearest you where you can receive, free of charge, information and counseling about long-term care insurance.

Can I Afford Long-Term Care Insurance?

Most people should not spend more than 7% of their total annual income on annual premium for a long-term care insurance policy. Estimate your discretionary income by subtracting your fixed expenses from your annual income. Then decide how much of that discretionary income you want to spend on long-term care insurance premiums.

Remember that after retirement, income often does not keep pace with inflation. As you age you are more likely to have unexpected medical expenses, such as prescription drugs or other medical costs that may not be covered by your medical insurance. The loss of a spouse can also result in reduced income. Select a premium you can comfortably afford. Take into consideration that your premium may increase during the years you own the policy. When talking to an agent about long-term care insurance it is important for you and your agent to understand your financial circumstances so that he/she can tailor a plan best suited to your needs.

Should I Replace My Existing Policy with a Newer One?

The advantage of replacing an older policy is that newer policies may offer more desirable benefits and features and fewer restrictions. Assisted living in an RCFE, Home Care benefits, Inflation Protection, and no requirements for a prior hospital stay are some of the benefits and features being offered in current long-term care products. However, just because a policy is newer does not necessarily mean it is better than the one you have.

One disadvantage to replacement is that the insurance company will charge higher premiums because you are older than you were when you bought your original policy. In addition, if you have any preexisting conditions or are 80 years old or more, companies may refuse to issue new coverage. If you are still insurable you might consider adding new coverage to the benefits you already have, or buying an additional policy to supplement your existing benefits. Even very old policies still provide a benefit, and the premiums are often much less expensive than a premium for a brand new policy at an older age. Before you add benefits to an existing older policy you should check with your agent, company, or tax advisor to see if you will lose the grand fathered tax status granted policies purchased prior to January 1, 1997.

If you are considering replacing an older policy, first ask your current agent or insurer if you can update your coverage. If you replace your policy with the same company you are likely to get a credit for some percentage of the premiums you have already paid against the new premium. Another possibility is to keep the older policy and add a newer one to supplement the daily benefit in the old policy, or add some of the newer benefits not in the older policy. Adding another policy won’t cause the loss of any tax advantages you have for the older policy. Whenever you are considering replacing a policy, consulting a HICAP counselor is recommended.

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