What is long-term care insurance?

Insurance is an important tool for protecting yourself against risk and can help protect against the significant financial risk posed by the potential need for longterm care services, either in a nursing home or in your own home. Longterm care goes beyond medical care and nursing care to include assistance for a chronic illness or disability for those unable to care of themselves for an extended period of time. Longterm care insurance pays for assistance in a nursing home, assisted living facility or in a private home. While older people use the most longterm care services, a young or middle aged person who has been in an accident or suffered a debilitating illness might also need longterm care.

Why is planning important?

For millions of Americans, celebrating an 80th, 90th and even 100th bitrthday is increasingly likely. When you live a long life, there is a very high risk you will need the type of care that's referred to as long-term care. Needing LTC places an enormous emotional and physical strain on loved ones and family members. That's why having a plan is so important. Incorporating LTC insurance into your financial plan can help you protect your assets. It can reduce the burden of care that would otherwise fall on family members and enable you to receive care in the setting you most prefer, including your home.

Are you likely to need long-term care?

About 19 percent of Americans aged 65+ experiences some degree of chronic physical impairment. Among those aged 85or older, 55% are impaired and require longterm care. By 2020, 12 million Americans are expected to need longterm care. Most will be receive care at home. Family members and friends are the sole caregivers for 70% of elderly people. The U.S. Department of Health and Human Services estimates that 70% of people age 65 and over will require some type of longterm care services during their lifetime. 40% of people over age 65 will need care in nursing homes sometime during their lifetime and 10% will stay there five years or longer. The odds of entering a nursing home increase with age with 22% of age 85 and older in a nursing home. Because women generally outlive men, they face a 50 percent greater likelihood than men of entering a nursing home after age 65. The U.S. Government Accountability Office estimates that 40 percent of the 13 million people receiving long term care services are between the ages of 18 and 64.

What's the best age to start planning?

You will never be younger or healthier than you are today. That's the reason to start planning now when you have the most options. The average age for new individual long-term care insurance applicants is 57; an age when many are able to qualify for good health discounts. This discount reduces costs and remains even if your health changes.

What does long-term care cost?

One year in a nursing home can average more than $70,000 and in some regions, twice that amount. Home care is less expensive but still adds up. Bringing an aide into your home three times a week (two to three hours per visit) to help with dressing, bathing, preparing meals, etc., can easily cost $1,000 a month or $12,000 a year. The cost of skilled help, such as physical therapists can be much greater. The average monthly fee assisted living facilities charge is over $3,000. Some residents in the facility may pay significantly more if their care needs are higher.

Who pays the bills?

Individuals and their families pay about 25% of all nursing home costs out of pocket. Generally, long term care isn't covered by health insurance and neither Medicare nor Medicaid covers longterm care. Medicare pays only about 14% for short term skilled nursing home care following hospitalization. Medicare pays for some skilled at home care but only for short term unstable medical conditions and not for the ongoing assistance that many elderly, ill and injured people need.

Why now?

Because changes in health happen and can make it impossible for you to obtain coverage.

What do policies cost?

The cost of long term care insurance varies depending on the options you choose. For example, inflation adjustments (COLAs) can add between 40% and 100% to your premium and keep benefits more in line with the current cost of care. Actual premiums will depend on many factors, including your age, level of benefits and the length of time you are willing to wait after you need services but before benefits begin.

What does Medicare cover?

Medicare covers very little, if any, of the cost for lont-term care and is restricted largely to specific illnesses and injuries and for short periods of time. Medicaid is the joint Federal and state welfare program for those with low income and financial resources. Each state operates its own Medicaid program which has created major budgetary issues for many states. Other Federal programs, such as Veterans Affairs, do pay for some LTC services, but only for specific populations and in specific circumstances.

Why buy something I might never use?

If you think about it, people hope to never file a claim on their homeowners, automobile, or life insurance. But that doens't stop them from owning coverage that protects against real reisks. The same is true for LTC insurance. The financial risks are too high and the potential burdens to loved ones are just too great to do nothing. The families of claimants rarely talk about financial benefits. Instead they talk about how insurance allowed Mom to be cared for at home... or how Dad was at a much nicer assisted living community located closer to the family. There are also return-of-premium option and life insurance or annuities that provide benefits to those who are concerned about never needing care.

How much coverage is the right amount?

That's something to discuss with an insurance advisor or a financial planner (which you have access through this platform) because there no 'one size fits all' solution. Your cost for insurance protection will be based on your age and health when you first apply, as well as how much coverage and what options you choose. A few things to consider: Find out costs for care where you live or hope to retire; Be sure your coverage includes an inflation growth option so your pool of benefits increases each year; Ask about a 'Shared Care' option that enables couples to link their policies in order to share benefits in the event one person's benefits are exhausted.