Monday, March 14, 2005

Employer-based Long Term Care coverage…

My better half, our brother-in-law, and a dear family friend all work at a local Fortune 100 company (which shall remain nameless, unless you happen to catch “Law and Order”). Like many large employers, this one offers the option of purchasing a Long Term Care insurance plan thru the magic and convenience of payroll deduction. All three have asked me to take a look at the plan(s), and render my professional, independent, expert opinion.
Such as it is.
These types of plans fall into two general categories. The first requires that, in order to keep the coverage, one must remain with the employer that offered the plan in the first place. The second type lacks this requirement; the plan is “portable,” meaning that you own it regardless of where you may work. If you leave the original employer, you’ll give up the payroll deduction benefit, and have to pay the premiums directly to the carrier. But the coverage stays the same, no benefits are lost, and the premium doesn’t increase due to this change.
Another area where such plans will differ is in the level and types of benefits offered. Because many such plans (including this one) are offered on a “guaranteed issue” basis, there is no medical underwriting. This is handy if one has on-going or substantial health problems. On the other hand, these products are priced to reflect this exposure. These plans cover nursing home stays, of course, but typically also offer additional benefits, such as increasing benefits to offset inflation, return of premium, and waiver of premium while “on claim.”
One last thing to consider: the rates for such plans (as for almost all LTCi) are NOT guaranteed. The carrier can’t raise YOUR premium based on claims or age, but can raise them for the group as a whole, usually based on their claims experience.
On a final note – and this is pure opinion – I am not sanguine about younger folks purchasing such coverage. How do I define “younger?” Good question! Really, I think those under 45 or 50 should be loading up on disability insurance coverage first. “Paycheck insurance” pays the bills, puts food on the table, and generally replaces lost wages. If one has a comprehensive disability plan (or plans) in place, THEN it may make sense to purchase LTCi.
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