Imagine this: you’ve found the ideal nursing home for your elderly mother to move into. It’s new, it’s affordable, it has a great reputation, and your mom’s long-term care insurance policy is going to pay for it.
Jump ahead to these sections:
- Definition of a Bed Reservation Benefit
- How Does a Bed Reservation Benefit Work?
- Are There Any Bed Reservation Benefit Pros and Cons?
- Other Long-Term Care Insurance Benefits to Look Out For
- Questions to Ask Before Buying Long-Term Care Insurance
- The Cost of Long-Term Care Insurance
You’ve completed your pre-planning for long-term care, you’ve made all of the arrangements, and she quickly settles in. Unfortunately, two months into her stay, she suffers a stroke and is taken by ambulance to the hospital, where she’s admitted and stays for several weeks.
You’re excited the day her doctor tells you she can go back to the nursing home. You call and speak to the administrator, who tells you that your mother’s bed has been given to someone else and no other beds are available.
What are you going to do? How could this happen? How could you have prevented it?
In this article, we’ll focus on question number three, “How could you have prevented it?” and learn about the solution that every person with a long-term care policy should have: a “bed reservation benefit.”
Definition of a Bed Reservation Benefit
A bed reservation is a benefit of a long-term care insurance policy that ensures that your bed in a nursing home is secured. If your policy provides this benefit, it can keep up the payments for the nursing home, memory care facility, or assisted care facility you’re living in while you’ve been relocated.
How Does a Bed Reservation Benefit Work?
Not all long-term care policies provide a bed reservation benefit. If yours does, it will continue to pay for your room (reserve it) if you need to leave the facility, even though you’re not there. This is very beneficial if you have to go to the hospital or a rehab facility.
Once it becomes apparent that you’re not going to be staying in the nursing home for an extended period of time, you need to contact the insurance company that issued your long-term care insurance policy and provide them with all of the information they need to process your claim.
You also need to let the nursing home know that you’ve filed a claim for your long-term care policy’s bed reservation benefit and that they can expect payment from your insurer.
Some nursing homes will also have language in their contract for residents that they will hold the bed if payment is going to be made by an insurance company.
It also won’t hurt if you bring a copy of your policy to the facilities financial department and show them where it explains the bed reservation benefit.
Are There Any Bed Reservation Benefit Pros and Cons?
The most positive benefit you’ll receive by having the bed reservation benefit is the security and peace of mind you or a parent would have when they’re in the hospital, and they know they don’t have to worry about having a bed in the nursing home to come back to.
There is enough pressure and confusion when you’re ill or injured, and you’re hospitalized. Finding out that you have no bed to come back to and will have to find a brand new facility is not something you want to deal with. A bed reservation benefit prevents that from happening.
There are a couple of cons to watch out for with the bed reservation benefit.
First, there will be a limit to the number of days the insurance company will pay for your unused bed. This is often a 60-day limit. After you’ve exhausted this benefit, you either have to pay out-of-pocket to keep the bed available or relocate to a different bed or nursing home when you’re discharged from the hospital.
The other con is that you may be caught in the middle between the insurer and the nursing home. Insurance companies sometimes have a challenge communicating with a medical service or facility provider. If you’re fortunate, your nursing home will have an insurance coordinator that will handle all of this for you.
Other Long-Term Care Insurance Benefits to Look Out For
There are three long-term care insurance benefits you need to be aware of before you buy a policy and after it’s issued: the elimination period, the benefit amount, and how long the benefit will be paid. Let’s look at each.
Join Cake's monthly newsletter.
Learn all you need to know about end-of-life.
This is the amount of time you have to pay for long-term care services out-of-pocket before your insurer begins paying benefits. The elimination period is comparable to the deductible in a health insurance policy—you have to satisfy it before the insurance company starts paying.
Most elimination periods are either 30, 60, or 90 days (you select this when applying for the policy). The longer the elimination period is, the lower your premium will be.
Most policies will pay up to a daily limit you’ve selected for care until you reach the maximum lifetime payout. You can choose a daily benefit amount of $125 per day and higher with most policies. Of course, the larger the daily benefit amount is, the higher your premium will be.
This is the length of time that the insurance company will pay your daily benefit. The most common benefit periods selected are two years and five years. Women need care for an average of 3.7 years, and men for 2.2 years.
Considering long-term care costs, you want to select the shortest elimination period, the largest daily benefit amount, and the longest length of time the benefit is payable as possible. Of course, your budget is going to be a significant factor when you select these three benefits.
Annual median costs of long-term care in 2020
Home health aide
Adult day health care
Assisted living facility
Nursing home care
$51,600 for a private one-bedroom
$93,072 for a semiprivate room
$105,852 for a private room
Questions to Ask Before Buying Long-Term Care Insurance
When you’re talking with different insurers about their long-term care options, here are some good questions to ask each of them. Comparing their answers can make your decision easier.
- Is inflation protection provided for in the policy? This is a must-have, considering how the cost of long-term care rises every year.
- Does the policy guarantee that the premiums will never increase? It wouldn’t benefit you to have a policy that had affordable premiums when you applied for it and then raised the rates every couple of years. Ultimately, you might be unable to afford the premiums, and all the money you spent would not be of any value.
- Does the policy cover home health care and all levels of nursing home care? This is comprehensive coverage you want to have. It should include skilled, intermediate, and custodial care.
- Does the policy provide comprehensive benefits for home care? Just about every senior wants to age in a place where they’re most comfortable—which is at home. You want to be sure the policy covers less severe impairments.
- Is the maximum benefit period one year or longer? You definitely don’t want a shorter period of time than one year. Two or five years is preferable.
- Is the policy guaranteed to be renewable? Make sure that your policy will never be canceled as long as you pay your premiums on time.
- Is the waiting period affordable? Ideally, you want to have a minimum waiting period of 30 days before you start to receive benefits, but the premiums are much higher than the 60 or 90 day waiting periods. What’s important is that you can comfortably afford the premium payments each month.
- Will the policy cover dementia that’s diagnosed later in life? You’ll find that most policies will cover conditions like dementia and Alzheimer’s, but it’s an important question to ask. Dementia is a very common cause of nursing home admissions.
- Is the policy affordable for you? It’s been mentioned before, but many people have bought a long-term care policy after seeing a dazzling sales presentation with lots of statistics, only to discover after several months that they committed to more than they could afford.
- What do you know about the insurance company? The company you select must have solid financial ratings and a history of paying its claims. You can do your homework online by looking at their ratings with A.M. Best, Standard and Poor’s, or Moody’s rating services.
The Cost of Long-Term Care Insurance
In this article, we’ve mentioned that the amount of coverage, elimination period, and benefit period all affect the amount of your premium payment. Additional factors include:
- Age and health: You’ll pay less when you’re younger and healthier. Many financial advisors recommend buying long-term care insurance when you’re between your late 40s and early 60s.
- Gender: The premiums for women are higher than they are for men because they live longer, which increases the chance of submitting long-term care insurance claims.
- Marital status: Premiums are lower for married people than they are for singles.
- Insurance company: Different insurance companies charge different amounts for the same coverage. If you work with an independent agent, they can get you quotes from several carriers so you can compare benefits and prices.
Don’t Forget the Tax Advantages
You’ve learned a lot about long-term care in this article, but some of the best news comes last. If you itemize deductions on your tax return, the federal tax code (and some states) will let you count part or all of your premiums as medical expenses, which are deductible up to a certain threshold. The limits on the amount of premiums you’re able to deduct increase with your age.