Comparing Long-term Care Policies

One of the best things about the investment business is that you get paid to read. A lot. A recent Investment Advisor article included some very helpful comments about how to compare long-term care policies.

One important difference between policies are the "benefit triggers" that enable the policyholder to begin collecting benefits. Better policies will cover cognitive impairment such as Alzheimer's, senility, irreversible dementia and mental dysfunction caused by stroke.

Benefit periods also differ between policies. Be certain the policy covers at least 3-5 years, the length of a typical nursing home stay.

The elimination period is the period of time before benefits can begin to be paid. Are the policies you're comparing comparable, with each having 30, 60, or 90 days? Longer elimination periods reduce premium costs, but comparing two policies with different periods is difficult.

Look for a "guaranteed renewable" clause as well as inflation protection, and for policies that cover all levels of care, both skilled and non-skilled. Finally, compare the financial stability of the company offering the policy.

Douglas B. May, CFA, is President of May-Investments, LLC and author of Investment Heresies.

Go to Investments main page.