Because long-term care insurance involves a considerable expense, most policy holders, unless they want and can afford very comprehensive “Cadillac” coverage, want to strike a balance between optimum coverage and what they consider an affordable premium cost.

Since the purpose of insurance should be to guard against the most devastating of financial losses, we generally recommend more protection against the possibility of a severe loss and, if necessary to make a premium seem more affordable, a higher deductible expense.

With these thoughts in mind for your situation, we suggest these possibilities as potential sources of premium savings:

A longer waiting period (“elimination period”) before the benefits begin and after you qualify for them: Increasing the waiting period from 90 to 180 days would lower your premium by over 10 percent and increasing it to a full year would lower it by 20 percent.

Duration of the benefit: Extending the amount or duration of the $5,000/month benefit you are considering from 3 to 5 years should significantly reduce the risk that you and your spouse will use up all your coverage. Your benefit limit will go even further with two additional options:

     “Shared services”: With this policy feature, which costs about an additional 10 percent, you and your spouse could “share” or use each other’s unused benefit. If you each have a 5-year benefit, for example, and one of you passes away without using any of the coverage, the survivor would have 10 years worth of benefits remaining.

     A “reimbursement” vs. “indemnity” method of paying a benefit: Under an “indemnity” basis for paying benefits, if you qualify for the benefits, the amount of the benefit will be paid to you automatically, even if you current long-term care expenses are less. With a reimbursement method, you are paid the benefits as the expenses are incurred. While the reimbursement alternative requires additional paperwork to document the costs of providing your care, the benefits will last longer when they are only paid out to cover your actual expenses. We therefore suggest the reimbursement method to conserve the benefits for as long as they might be needed.

Daily vs. Monthly Basis for Setting and Calculating Benefit Limits: Your policy proposal appears to include a “daily” basis for calculating expenses and determining whether they fall within the per diem benefit limit. Many forms of care, and some of the more expensive ones, are not administered every day but only every week or less frequently. Policies that measure expenses on a daily basis and fail to reimburse those that exceed a daily benefit limit are more restrictive than those that aggregate expenses and benefit limits over longer periods to determine how expenses compare to a benefit ceiling. Figuring expenses monthly will enable more of the periodic expenses, which are not incurred every day, to stay within benefit limits.

Licensing Requirements for Care Providers: It is unclear from the information we have about the policy whether care providers must be licensed. You will want to check to see whether the proposed policy offers a possible waiver of the licensing requirements for home care services and personnel, the area where licensing status can most likely present a coverage problem. Where this waiver provision is included, this potential flexibility comes under the supervision of a care coordinator selected by the insurer who oversees the use of such non-licensed services. The use of the care coordinator can also result, in some cases, in a waiver of the benefit waiting period for home care.

Avoiding Potential Future Premium Increases: Most long-term care policies are “guaranteed renewable,” meaning that they cannot be cancelled. However, the insurer can raise the premiums uniformly for all policies of a particular type. Premiums have increased on the policies of most companies in the past, as they initially priced their policies too aggressively and underestimated their future claims experience. A “10-pay policy” alternative is available, for a significantly higher premium, which would give you fully paid-up policies after this period and which would also avoid the risk of a premium increase at any time. Given the description of your financial situation in your answers to the questionnaire, you may be in a position to consider this alternative.

If you like, please call to discuss our findings and suggestions and the additional ways we can help you obtain the right coverage at a fair price.