Making sense of long-term care insurance | Opinion – About Your Online Magazine


Although your focus is likely to be on caring for your loved one, it is important to think and prepare for your future care needs. Long-term care insurance (LTCI) is a hot topic today, as more than 76 million baby boomers approach retirement. Statistics say one in two older Americans will need long-term care, but unfortunately, most baby boomers have done little in terms of planning the care they are likely to need in the future.

With the increase in the American elderly population, the longer average life span and the increase in health care costs, it is advisable to consider LTCI as an option for when one day you will need extra care yourself.

Planning for long-term care

LTCI is a separate insurance policy that covers the costs that arise when an individual needs ongoing care, including home care, palliative care, home care for the elderly or care in an apartment in a residential unit.

Although LTCI is probably not at the top of most Americans’ priority lists, it probably should be. Statistics show that 72% of elderly Americans become poor after paying for a year of long-term care.

The average cost of a private room in a nursing home in the USA is $ 69,400 per year. If an individual wishes to remain in his own home, instead of entering institutionalized care, the national average rate for a home health worker is $ 18.58 per hour or $ 446 per day for 24-hour care.

If you think the government or your health insurance will cover these costs, you better think again.

Most long-term care costs are not covered by Medicare or most health insurance plans. Medicare covers only qualified and rehabilitation care (doctors and nurses) and does not cover custody care, including help with activities of daily living (ADLs). Medicaid will cover the cost of care, but only after an individual has exhausted all of his assets.

Many elderly Americans end up relying on family members to provide care. Some end up exhausting all their assets and going to Medicaid, resulting in coverage that restricts where an individual receives care. With a little planning and funds available to cover LTCI premiums, most Americans can avoid overwhelming their family with their long-term care needs and still leave some assets behind.

LTCI options

People should start thinking about buying an LTCI policy when they reach 50. Although some employers offer LTCI policies as an optional benefit, in most cases, LTCI is a policy that you will need to purchase from an outside company.

Several factors will influence the cost, so check the annual value for LTCI.

The prize will depend on:

• How much time do you pay out of pocket until the policy

• Starts (usually 90 days)

• Age and current health status

• The amount of coverage you can afford

• How much will you need to cover average service costs in your area

Before purchasing a policy, it is important to find a financial planner or insurance agency specializing in long-term care planning and talk to them about options.

Some things to consider:

First decide if LTCI makes sense, given your current situation. If you have a large amount of assets, you will probably want to purchase a policy to protect your assets. However, if you cannot pay the premiums without changing your current lifestyle, then it may no longer make sense for you.

Make sure that the policy you choose does not require hospitalization before the service begins. If so, you can save on premium costs, but you may end up paying an exorbitant bill before you can access the benefit.

Make sure that the chosen policy takes inflation into account. You will want a policy that has a compound increase in the benefit of protection against inflation (usually around 5%) to cover the price increase.

After deciding on the type of coverage and plan you need and can afford, examine the companies that offer these policies. You will want to make sure you are choosing a solid company with a proven track record in LTCI.

Although LTCI is still relatively new, experts predict that its popularity will continue to grow as a viable option for preparing for retirement. In fact, some states now grant tax deductions for purchasing LTCI policies.

Gail Gilman is a family life consultant, M.Ed., C.F.C.S. and Professor Emeritus at the University of Minnesota. Reach her in waldn001@umn.edu.

Paula Fonseca