One close family friend of mine recently called on the phone to ask me, “So I am thinking about long-term care insurance, what exactly should I be looking for and where do I start? ” And my answer was, ” Are you confused?” “Yes.” “Well, that’s how most people start.”  We both laughed, but the point remains that picking a long-term care insurance plan can be very confusing. Some of the other postings on this particular subject I have covered the benefits of buying a policy especially in the early years of retirement. But what should you be looking at when you are shopping around for an LTCI policy?, and how do the policies actually work?

1. Check out what will be covered.  LTCI policies vary and may cover home health care, homecare, adult day care (and health care), assisted living, skilled nursing care, hospice care or some combination of these, but one must look closely and see what is being covered. Your best bet is to get a policy which covers most, if not all, of these possibilities.

2. How benefits will be paid out. Most of the policies pay by a daily benefit. Sometimes the daily benefit is calculated using a monthly average. This is an advantage when working with nurses, aides or homecare might work sporadic hours if, for example, once a family caregiver might be available. Secondly, benefits are paid on either an indemnity or reimbursement plan. So this means that benefits are either a lump sum payment regardless of what the charge is OR (in the case of reimbursement) the insurance carrier will only pay the actual charges for care even if the charge is lower than the maximum daily. Sometimes the unused funds are carried over.

3. When your coverage will begin.  A lot of policies spell out how many activities of daily living (like dressing or bathing) you must need assistance with before your coverage begins. Also remember that there is a waiting period, which is from 0-90 days, and it can also take longer. So you need to consider what you can afford to cover before your benefits kick in.

4. How long will your benefits last.  How long will the benefits last? A few years? Maybe 10 years? Although this is somewhat of an unknown, you need to take into account if you are predisposed to a chronic illness and what kind of funds you have at your disposal.

5. What will your benefits be “worth” once they are paid out to you. Not only should you look at how they are paid out but what is exactly paid out in regard to inflation. Many policies offer some sort of inflation protection. Once long term health care costs seem to be on the rise, this protection translates into having a financial cushion protecting your assets.

6. Which resources can help you make the best decision.  There are actually three resources that you may need to use when making the best decision: ratings companies, a reliable agent and yourself. Make certain you choose a company who has been in business and is highly rated by A.M. Best, Moody;s, Standard & Poor;s, or Weiss. Looking for professional assistance with long-term care insurance and which policy meets your needs? Get a free long-term care insurance consultation and quote. Finding an agent is tricky. Many people are “referred” by carriers or internet searches. This is just like mushroom-picking by memory, but this is not in your best interest. Look for an agent that sells a variety of products, but specializes in LTCI.

Also remember that if the agent’s commissions are standardized. And although most of these decisions can and should be aided by professionals, it is always your job to be vigilant. Use common sense along with the help of professionals. It can be hard to determine what your long term care needs are. A good place to start is by looking at what many consider the baseline;that is, what the federal government offers to its employees via the Federal Long-Term Care Insurance Program.