Do You Know What’s in Your Long Term Care Insurance Policy? (Part 2)

            Last week we were talking about Bob and his dad, Jim.  Jim had always told Bob that he had long term care insurance to cover the cost of his care.  However, now Bob was discovering that the policy isn’t what Jim represented it to be.

            As I explained last week, Bob learned that Jim has $75 per day of coverage for assisted living care and $150 per day if he moves to a nursing home, which Jim does not yet need.  Bob wants to keep his dad at assisted living level care as long as he can.  That 50% limit was the bad news.  However, the good news, or so Bob thought, was the fact that Jim had an inflation rider that increases the daily rate by 5% of the original rate each year.

            But when Bob called the insurance company to start the process of putting in a claim, he was informed that his dad had dropped the inflation rider several years ago.   Jim had received a letter from the insurance company about a rate increase.  Unbeknownst to Bob, and concerned about affording the premium on the policy, he exercised an option to keep the premium the same by eliminating the inflation rider.

            Even worse, when he got a letter a few years after that about another rate increase, he chose again to keep his premium the same by reducing his daily rate.  The end result is that Jim has $225 per day of coverage for nursing home care and 50% of that, $112.50 per day for assisted living care, substantially less than Bob had believed for years.

            There isn’t anything Bob can do about it now but it is a lesson for others.  Have a conversation with your loved ones about what long term care insurance they have, but take the next step and ask to see the policy.  Additionally, have a conversation about the importance of your loved one discussing any changes to coverage limits with family members before making any decisions.

            Jim’s situation is occurring more often as policyholders receive notices of rate increases of 15 to 20% on traditional long term care insurance premiums.  Before you decide to simply lower your coverage to keep your premium from rising, remember that you chose your original coverage limits for a reason, to insure against an expense – or a part of an expense – that you cannot afford.  Simply reducing that coverage could leave you exposed unless you have a plan to replace that coverage.  In Jim’s case, Bob will now have less than he thought he had to manage his dad’s care in an effort to keep him out of a nursing home as long as possible.

            Unfortunately, we get calls similar to Jim’s more and more these days as insurance companies continue to raise rates.  There are other options that may be available, such as asset based long term care insurance products that allow you to lock in the premium, meaning the insurance company can’t raise the rates.  I talk about these in my new book, “Don’t Go Broke in a Nursing Home”.  For a copy or to get more information about whether any of these options may work in your personal situation, email us at contact@hauptmanlaw.com.