Why should you compare and/or replace long-term care insurance (LTCI) policies?

Unfortunately, long-term care insurance (LTCI) policies are not standardized–provisions contained in policies vary greatly, and premiums charged vary as well. Therefore, it is important for you to compare to get the best policy possible–at the best price.

And if you already own an LTCI policy, you might wish to consider changing plans or upgrading coverage. This would be appropriate, for instance, if you’re in good health and have an old LTCI policy that was highly restrictive–perhaps it required you to have a prior hospital stay before benefits would begin. Most of the newer policies are less restrictive. Also, most of the newer policies offer inflation protection, another advantage.

How should you compare companies?

You should compare several companies and agents before you buy an LTCI policy. And it’s important to review the financial strength of the companies you’re interested in. You can do this by reviewing the company’s A. M. Best Company’s rating along with the opinions of other rating services, such as Moody’s or Standard & Poor’s Insurance Rating Services, at your local library.

If you decide to go with an A. M. Best rating, you should select an insurance company that has received a rating of at least A or A+ from A. M. Best. This means that the insurance company is excellent or superior and entails very little risk. The following chart outlines the various ratings:

COMPANY RATINGA. M. BEST SCORE
Superior (little risk)A++ or A+
Excellent (slightly more risk)A, A-
Very Good (strong claims-paying ability)B++, B+
Fair (less protection against risk)B,B-
Marginal (relatively high risk factor)C++, C+
Weak (high risk factor)C,C-
PoorD
Under Regulatory SupervisionE
In LiquidationF
SuspendedS

Of course, you can also review the company’s financial statements to determine its financial stability. Review the annual report and find out how long the company has been in business.

How should you compare policies?

Before analyzing different policies, you should complete the following steps:

  • Obtain sample policies and outlines of coverage from each carrier you are considering. The outline of coverage summarizes the policy’s benefits and highlights the important features.
  • Review the company’s rating and financial strength.
  • Determine the current cost of long-term care in the area you live (or in the area in which you intend to move). You can do that by contacting nursing homes, home health care agencies, adult day cares, and state elder affairs offices.

Next, you need to read the actual policies carefully, making sure you understand each provision. After you’ve made sure that each policy contains the provisions you desire, you’ll want to compare prices. Finally, you might want to consult with an agent, financial planner, or other professional to ensure that you’ve selected the policy that will best suit your needs.

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