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Posted: December 31, 2010

What You Need to Know About Long-Term Care Insurance

Averting Your Care Crisis

It’s a conversation nobody wants to have, but the likelihood that long-term care will be in our future is undeniable and needs to be discussed. Make time for that family dialog and consider long- term care insurance as a way to plan ahead and guide mom and dad through old age while keeping your finances intact. You may even sign up yourself.

With Americans getting older, and the average life expectancy continuing to rise, the age-85 and over group is the fastest growing segment of the population. And because more than half of all Americans expected to spend some part of their later years in long-term care situations, the simple math is not deniable: No matter how inconvenient it is to accept, no one is untouched by the effects of aging which often mean diminished physical or mental ability.

The number of Americans who will require long term-care is on the rise and so is the cost of that care. In 1994, more than 7 million Americans needed long-term care services at a cost of about $44,000 per year. By the year 2000, that number increased to 9 million with a price tag close to $56,000. Today’s cost average -- a staggering $75,000 per year -- is projected to reach a much more breathtaking number -- $300,000 annually -- in the next 20 years for the more than 23 million Americans who will need it. Few, if any, Americans are financially equipped to handle that bill.

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Discount Prescriptions
Insurance to the Rescue

This is where long-term care insurance (LTCi) enters the picture. LTCi was developed specifically to cover the costs of long-term care services which most health insurance, Medicare, or Medicaid do not cover. Policies tend to be flexible, allowing individuals to customize the benefits to best meet their current and projected needs. Cost is based on the type and amount of services covered, as well as the individual’s age at the time of purchase. Though those in poor health may not qualify for long-term care insurance, they may be able to purchase it for limited coverage or at a higher rate.

The benefit period for long-term care insurance policies is commonly between 2-5 years or lifetime, which provides unlimited coverage. This is the amount of time or the total amount of money up to which benefits are paid. With LTCi, premiums are determined based on what can be planned and budgeted up to the point where you need long-term care services. Premiums are generally waived once benefits begin.

You first choose a maximum daily benefit amount which allows anywhere from $50 to $500 a day, though a monthly amount is sometimes offered as a more flexible option for days that require more or less care. You also choose a maximum lifetime benefit for the policy, to provide in a dollar amount, $100,000 for example, or you can purchase an unlimited policy.

Understanding What’s Covered

Most policies offer comprehensive care but facility-care-only is also available. A comprehensive policy offers a range of services and care settings that includes both in-home care and facility care, while a facility-only policy, which generally costs less, pays for care in a nursing home or assisted living facility, but not for in-home or community services.  This policy is best suited to those who plan on family and friends to care for them at home until they need a facility.

Morris Sabbagh is an elder law and estate planning attorney in Lake Success, New York. Helping seniors and their families plan for the cost of long-term care is a regular part of his practice. “I tell my clients that there are only three ways to pay for the cost of long-term care: 1. private pay, 2. Long-term care insurance and 3. Medicaid."

Rather than spend down their assets, Sabbagh advises clients to consider LTCi if they medically qualify because, he explains, “The annual premiums are just a fraction of what the cost would be if long-term care is eventually needed, and it allows seniors to keep control of their assets and remain financially independent. That being said, some seniors are just not able to fit the cost of long-term care insurance into their budget. For those seniors, the other options have to be considered.”

Buy Young, Use Years Later

LTC insurance specialist Honey Leveen, of Houston, says LTCi is a product for people in their 60s to early 70s, but the younger you are, say those in their 40s and 50s, the lower the rate. “We’re all living so much longer,” Leveen explains, yet, “fewer than 10% of Americans own this coverage. It’s a denial factor; people don’t want to talk about this. We’ve got a bulge of Boomers turning 65 about 15 years out who will need care all at once. It’s not going to be a pretty picture.”

Preservation of wealth, along with dignity, choice, and options are main reasons Leveen recommends LTCi. With a 70% probability that you will need long-term care, it makes sense to plan for it by protecting your assets. Dignity, options and choices of LTCi allow individuals to be independent and not a burden to a spouse and children, while still maintaining the hard-earned family legacy and peace among family members. Many people choose LTCi after watching relatives and friends wiped out financially, physically and emotionally caring for a parent or spouse in what they thought would be their comfortable retirement years. With this kind of reality, Leveen asks, “how can you afford to notown LTC insurance?”

In answering that question, social worker and geriatric care specialist, Dr. Forrest Hong, executive director of Senior Savy in Los Angeles, cautions, “Purchasing a long-term care policy can be complicated and it may not necessarily fit your needs.” He recommends families make the decision using a holistic approach by consulting with a geriatric social worker to determine long term needs, a financial planner to assess current and future financial goals, and an elder law attorney to ensure protection of assets and estate.

It’s never too early to discuss your parents’ future, and your own. Long-term care insurance should be at least considered as an option in every family’s plans. Reach out to find answers to questions and sit down with professionals who are equipped to guide you and your family through this very serious matter. Peace of mind and security as the clock ticks faster will be your reward.  

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Lori Zanteson is a California-based freelance writer. She specializes in topics related to families and can be reached at lorizanteson@verizon.net.

Resources

US Department of Health and Human Services National Clearinghouse for Long-Term Care Insurance (LTCi) information, www.longtermcare.gov/LTC/Main_Site/index.aspx

The American Association of Long-Term Care Insurance, www.aaltci.org/

Long-Term Care Insurance National Advisory Center, www.longtermcareinsurance.org

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