TIPS TO CONSIDER WHEN THINKING ABOUT BUYING LONG-TERM CARE INSURANCE

One in three individuals who turn 65 will spend time in a nursing home --- not counting those who stay three months or less.

Forty-two percent (42%) of Americans who are 65 today will enter a nursing home during their lives. The current annual cost of care approximates or exceeds $50,000, and none of it is covered by Medicare, Medigap or medical insurance.

Women are especially vulnerable because they have a 50% greater likelihood of needing nursing home care than men.

The average cost of a nursing home will either double or triple by the time baby-boomers reach old age. The average American man can expect to spend $57,000 on long-term care, while the average woman will spend $125,000.

One of four patients will stay in a nursing home for a year. One of ten will stay five years or more, with the risk being much higher for women than men.

Consideration of long-term care insurance should be part of an overall asset protection and care management plan. For some, long-term care insurance is not an option because the individual is uninsurable or the policy is unaffordable. In those situations, elderlaw attorneys can explore asset protection options available.

Securing private insurance to pay for long-term care is important because there is no comprehensive governmental program for seniors except for Medicaid which is in the throes of budget cuts.

While long-term care insurance can allow you to maintain control over your assets and reduce the high cost of catastrophic illness, should the coverage run out or be insufficient to pay the costs, it is essential that you be in a position to begin appropriate Medicaid planning.

There are a number of quality long-term care insurance policies on the market today that cover nursing home, assisted living, and at home care, but there is little uniformity among the carriers and policy provisions can be confusing. That's why it's a good idea to seek advice from an experienced long-term care insurance agent or financial advisor before you consider a purchase as part of your comprehensive plan.

Generally, coverage is purchased for period of years (three, five, or lifetime). The longer the term of coverage, the higher the annual premium.


WHICH INSURANCE COMPANY SHOULD YOU CHOOSE?

FINANCIAL STABILITY: You should look at a company's financial stability from ratings that are based on an analysis of the company's financial records.

TYPE OF CONTRACT: You can choose between indemnity AND reimbursement contracts.

HOME HEALTH COVERAGE: See if the policy provides coverage for professional (licensed) or informal (unlicensed) care at home. If so, to what extent - - 50% or 100% of nursing home care rates?

INFLATION OPTIONS: Long-term care costs are increasing by 11% to 13% per year. You may want to add inflation protection to your policy or purchase a higher per day rate depending on your age and financial ability.

DISCOUNTS: Discounts may be available to reduce your premium, such as spousal discounts.

RIDERS: Check and see what riders are available.

ASSISTED LIVING FACILITIES: Coverage may vary from between 50% to 100% of nursing home rates. This is important because assisted living is becoming a widely used benefit.

UPGRADING PRIVILEGES: Can you do so after you purchase your policy?

HOME MODIFICATION: Will the policy pay for home modification if needed for disability?

COST OF LONG-TERM CARE POLICIES

A long-term care policy can be expensive but nowhere near the devastation of nursing home costs. You must make sure you can pay the premium and still afford your health insurance and other expenses. Today, it is not unusual for a 65-year-old couple to spend $7,000 to $8,000 per year for their health insurance coverage and medications. Long-term care insurance coverage, with inflation protection, can be as much as $2,000 or $2,500 for a 65-year old.

The premium will be lower if you're younger, and higher if you're older. If you buy a policy with a large daily benefit, a longer maximum benefit period, or a home health benefit, it will cost you more. Inflation protection can add 25% to 40% to the premium. Non-forfeiture benefits can add 10% to 100%.

You should not buy long-term care insurance if you cannot afford the premiums, if you have limited assets, if your only source of income is a Social Security benefit or small pension, or you have trouble paying for utilities, food, medicine and other important needs.
You should consider buying long-term care insurance if you have significant assets and income, you want to protect some of your assets and income, you want to pay for your own care, you want to stay independent of your support of others.

HERE ARE SOME OPTIONS TO EVALUATE

Age at Purchase: The younger you are, the less expensive the insurance. If you buy at age 50 and keep the coverage for 35 years, you will pay one-third (1/3) less than if you buy the coverage at 75 and keep it for ten years, even counting what the early money could have earned.

The typical annual cost for a 50 year old with a benefit of $150 a day is between $500 to $1,000 depending on the type of policy.

The premium is supposed to stay level for life. At age 70, the same individual will pay $3,500 to $5,000 per year. But, if the policy is not profitable, the insurer can, with state regulators permission, increase the price of a class of policies so premiums are not guaranteed.

Amount of Coverage: At a minimum, you should insure for the difference between how much you can afford to pay for a nursing home and the projected nursing home cost. For example, if you can pay $50 a day and the nursing home cost is $120, purchase a policy for $70 plus an inflation rider. Some people insure the entire cost if they can afford it.

How long do you need the coverage?: A five-year benefit costs about 15% to 20% more than a three-year benefit. That's money well spent if you are one of the unlucky 10% who stay that long. Lifetime benefits are 25% to 50% more. You can lower the premium by accepting a long upfront waiting period before benefits begin. A 100-day wait saves 5% to 10% and over the cost of a policy with a 20-day wait.

Coverage: You need comprehensive coverage which should take effect if you become unable to perform two or more of the five activities of daily life (bathing, dressing, toileting, eating, and transferring). Less expensive policies may pay only if you are unable to perform three activities of daily life.

Homecare Options: Some policies offer a rider for home or community care. Others give you specific amounts of benefits that can be used in any qualified setting. If you have limited resources, consider purchasing coverage which insures you against the catastrophe.

Inflation Options: The younger the buyer, the more reason to preserve the future value of the benefits by using inflation factors. Older buyers in their 70's can probably do without it.

Marital Status and/or Children: Whether you are married or single, with or without children, you should start considering long-term care coverage as part of your overall insurance needs. Like life insurance, it is less expensive if you start younger. If you're less that 30, you may question it, but what if you have a serious accident?

Tax Qualified Policy: Find out if the policy has other qualifications which allow you to take a tax deduction for the premiums and provide tax-free benefits.

Guarantees: Find out if the policy is guaranteed for life or can the insurance company cancel it. Make sure the insurance company cannot cancel your policy if it finds out you are in bad health. Virtually no company issues policies with guaranteed premiums because no one can predict future health costs.

Waiting periods: The waiting period should not be longer than three months, and you should only have to meet that requirement once during your lifetime. Some policies count only the day so if you have a 90-day waiting period and are receiving care three times a week, you won't get benefits for seven months. But if the waiting period starts on the first day you receive care, you will start getting benefits 90-days later. This needs to be looked at. Make sure the waiting period isn't reset if you go from homecare to a nursing home because about forty percent (40%) of nursing home and assisted living residents have received home care first. If the waiting period starts from scratch when you move, you could end up paying thousands of dollars more before receiving benefits.

Home health, skilled, intermediate, and custodial care: These provisions give you an option to stay at home, receive care, and receive all levels of care in a nursing home or in assisted living. Each policy is different.

Hospitalization as prerequisite to benefits: Do not purchase a policy where hospitalization is required before benefits begin . You may simply start needing home care or assisted living, and insurance of this type policy may not pay for it.

Conditions that trigger benefit payments: These should specifically include Alzheimer's disease, Dementia, and the inability to perform two of the five activities of daily life (bathing, dressing, toileting, eating, and transferring).

Be Careful: Many policyholders receive a varying amount of care each day. For example, a home health aide may only come in three days a week. So if you purchase a policy with a $100 a day daily benefit, but pay $200 for the aide on the day the aide comes, you will only receive $300 per week while paying $300 out of your pocket. But if your policy looks at a week's worth of expenses, which more are starting to do, the entire $600 will be covered.