Dennis W. Warneke

Benefit Design Group

Long Term Care Insurance
Almost everyone knows the merits of life insurance — the umbrella for that rainy day.  But few of us consider that perhaps a bigger need is for long-term care insurance — coverage for the unfortunate event that you become incapacitated or disabled and unable to care for yourself.  A 2007 national poll by Public Opinion Strategies found that 75 percent of Americans have made no preparations for long-term care.  Well, it’s time to face the hard facts about long-term care.
Fact one:  Today, approximately 9 million Americans over the age 65 will need some form of long-term care, and that number is estimated to reach 12 million by 2020.

Fact two: Don’t let youth lull you into a false sense of security.  Although the majority of people who require long-term care are over the age of 65, a substantial 40 percent are between the ages of 18 and 64.

Fact three:
The cost of long-term care can be expensive.  According to Cost of Care Studies by several major long term care insurance providers, the average daily rate of private nursing home care is over $225 (depending on location).

However, it’s never too late to evaluate your long-term care needs.  Here are some factors you should consider:

Who is a suitable candidate for long-term care insurance?  Single people with no one to look after them in case of a debilitating accident or illness should consider taking out a long-term care policy.
Women are also ideal candidates for this insurance coverage since they tend to live longer than men.
Finally, anyone who wants to protect a nest egg should contemplate it.

Is it costly?  It varies, depending on the type of policy; how old you are when you apply and your health.  Typically, most policies may range from $3,000 to about $7,000 a year.  Couples typically receive some type of discount.

What does it cover?  Depending on the contract, a typical long-term insurance policy covers any nursing home or institutional setting — semi-skilled, adult daycare and managed care all the way up to condo-type healthcare homes.  It also covers in-home healthcare, both by professionals and family members.  Of course, the higher your premium, the more long-term care you will be able to afford.

What doesn’t it cover?  Long-term care insurance is not medical insurance.  It does not cover hospital stays nor will it cover any medical payments.  Long-term care policies also typically do not cover acupuncture, heavy-dose vitamin therapy.

How do you calculate the coverage you need?

•  People who have good health records and whose ancestors have lived long lives may want to consider purchasing a policy before they retire.

•  If your family has a history of early mortality, long-term care insurance should be something to contemplate when you’re in your forties.

•  Are you married?  (Married people tend to live longer and thus are likely to wind up needing long-term care.)

•  How much can you afford?  Long-term care costs tend to be pricey and vary according to geographic regions.

Is the premium locked in?  No.  In some cases, premiums have risen as much as 40 percent.   However, there is a modicum of protection from excessive rate hikes: Premiums cannot be increased without first receiving approval from your state insurance commissioner.  It may seem like a lot on a pure percentage basis, but on a true dollar basis, it can still be a good value.

What kinds of options are involved?  You can buy additional insurance meant to provide inflation protection, at a simple or compounded rate.  There are shared-care options on some policies, where the balance of the policy is extended to a surviving spouse.  And there are “limited-pay” policies, which are intended to insulate you from future rate increases.  These are all matters to discuss with your financial advisor.

What triggers the insurance benefit?  Think about what you do within the first 15 minutes of waking up: getting up out of bed, getting dressed, going to the bathroom, taking your medication, feeding yourself.  Most policies cite the inability to perform two of six daily activities for at least a period of 90 days for the insurance benefit to kick in.  Separately, there is also cognitive impairment: Do you know who the president is, what day it is, who you are?  In either event, a physician makes the ruling.

Contact us for additional information.