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What You Need to Know About Long-Term Care Insurance


What You Need to Know About Long-Term Care Insurance

The numbers may not be in your favor. More than 70 percent of Americans 65 and older will need long-term care, says Dr. Marion, author of Elder Care Made Easier. Medicare and insurance will not cover all long-term care needs. “People are concerned they'll run out of money before they run out of breath,” says Marion.

The facts make looking at long term care insurance a must-do.

Who needs LTC?

If you develop a chronic illness or become disabled and are unable to care for yourself for an extended period of time, you’ll need long-term care services. In 2011, the national average daily rate for a nursing home was $239 and the national average monthly rate for an assisted living facility was $3,477, according to the MetLife 2011 Market Survey of Long-Term Care Costs. Long-term care is expensive. If you have more than $3 million in investable assets for retirement you can self insurance, and if you have less than $50,000 you typically would turn to government assistance but those in the middle need a safety net, says Julie Murphy Casserly, author of The Emotion Behind Money.

Long-term care insurance can not only help cover the costs of late-life custodial care, (which can easily reach several hundred thousand dollars over a few years), but also has an asset-preservation planning tool, if seniors wish to preserve their wealth to pass on to the generations, says Kevin Worthley, a certified financial planner with the Retirement Planning Company of N.E.

Understand the fine print

Long-term care insurance however, is fairly complex. There are different policies on the market with different features and options. Do an apples-to-apples comparison. This means reading all of the policy's fine print and understanding how the company issuing your coverage plans to administer the policy you plan to purchase, says Paul Forte, CEO of Long Term Care Partners, the provider of the Federal Long Term Care Insurance program.

Figure out how much you need. Considerations include – whether you wish to insure for substantially all or a portion of your risk, the cost of living in the geographic location where you live now or plan to retire, the kinds of facilities you may wish to access and the rate at which you expect inflation to increase costs over time, points out Forte. Lifehappens.org, ltcfeds.com and the U.S. Department of Health and Human Services, (www.longtermcare.gov), are just a couple of the many long-term care resources online.

Get what you need

When you're trying to assess how much you need, take into consideration any income you might get from Social Security and pensions for example, that will still continue even when custodial care is required. “You may not need as much insurance as projected custodial care suggests,” says Worthley. At the same time, cost estimations may only include the “basics” and may be “average” for your state. If you were to require a private room or other “above average” living needs, you may require more coverage than the average.

You might also want to explore getting a “shared care” rider that gives you and your spouse access to each other's benefits if use up your own.

It's key to know whether coverage includes a nursing home stay, assisted living facility, adult day care, a combination of those things or what? Find out the amount of payout on a daily basis from the policy and how the company will handle payouts, says Marion.

What you should think about

For all the good that a long-term care insurance policy can do, there are some things to be aware of. Most long-term policies don't pay anything until the person has been in a nursing home for more than 90 days. If more than two-thirds of those going into nursing homes leave before 90 days are up, it is unlikely that most people will receive any benefits at all, warns Debra Speyer, a trusts and estates attorney with the law firm of Debra G. Speyer.

Premiums can and will continue to rise. John Hancock, one of the largest long-term care insurance companies hit many policy holders with a 23% increase this year, says Speyer. Look at the numbers. “Homeowners insurance premiums run from $300-$1,000 per year, typically, whereas long-term care insurance averages $3,500. Compare the fact that you can insure a half million dollar home annually for less than $800 with what you get for $3,500 in long-term care insurance premiums, and you will see that clearly the latter is not a good deal,” says Speyer.

If not LTC insurance, then what?

There are alternatives to long-term care insurance policies. The newer hybrid form of insurance combines life insurance and long-term care. The option offers solutions for long-term care, as well as a life insurance death benefit to surviving spouses or beneficiaries. This type of insurance eliminates the “use it or lose it” issue many have with other types of long-term care insurance, says Pete D'Arruda, president of Capital Financial Advisory Group.

Check out too, annuities that offer long-term care and/or healthcare riders. Some annuities double income payments for up to five years for healthcare. There are obviously some conditions for the double income to kick in, but it's an option to address long-term care, says D'Arruda.

Say Forte, “One of the biggest mistakes you can make is to think that long-term care risk is something that will not affect you personally, or that you can simply ignore it.”



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Comments
15 Comments.


Comment #2 by Anonymous posted on
Anonymous
To the previous poster...why on Earth do you feel I should pay for your 'necessities'?

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Comment #4 by Carly (anonymous) posted on
 Carly
My mom paid for long-term care insurance--towards the end it was around $4000 a year. When she finally needed it, they put up every roadblock in the world and didn't pay a dime.  PLEASE read the entire policy carefully.  Hers said they would start paying on the 91st day of care--but they kept dropping the claim and the 90 days had to be done over and over again.  A neighbor's husband was denied because the wrong kind of doctor admitted him to the hospital, even though the policy didn't specify that.  This insurance is for the profit of the insurance company, not to actually help people.

17
Comment #5 by Ken D. (anonymous) posted on
Ken D.
Something else that must be considered is the premium cost. As time passes will the elderly person be able to afford the $4,000 or so per year premium? If not the policy is cancelled and all paid premiums are lost.

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Comment #6 by cactus posted on
cactus
A little searching with Google will bring up many articles with examples about how LTC insurers weasel out of paying off. If they stall long enough, the insured person passes away.

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Comment #7 by cactus posted on
cactus
Honest articles about LTC insurance explain why that "More than 70 percent of Americans 65 and older will need long-term care" statistic quoted by the insurance companies is purposefully misleading. 

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Comment #8 by Paoli (anonymous) posted on
Paoli
I don't know what everyone is so concerned about "long term care".  That's not the way it seems to be done anymore.  One, unless they are lucky enough to be able to die at home, goes into a nursing home and after they take everything away from you to pay for it, you get to go on "Medicaid" and spend the rest of what hopefully is as few months as possible in a nursing home and Medicaid pays for it.   There are Medicaid lawyers who specialize in showing you how to do this so you really should be looking for those lawyers instead of worrying about "long term care", imo.   If we had more Dr. Kevorkians and it was legalized, it could save the taxpayers billions of dollars but then again most people don't like to think about dying since they must be having such great lives here.  To each his or her own, imo.

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Comment #9 by Anonymous posted on
Anonymous
My concern is with the spendown rules before Medicaid will pay.  I know all the family income, including my spouse's, would be subject to these rules.  All family income would be directed to Medicaid and the "well" spouse living in our home would be "allow" to have a mediocre monthly income to live on (approx 2000/mo).  I know going to a Lawyer who specializes in this is the best route to go, but they also take a nice chunck of change.

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Comment #15 by Paoli (anonymous) posted on
Paoli
#9  You may want to know that you can get a list of lawyers who specialize in Medicaid and get a free consultation from them.  Make a list of questions you are concerned about and it is surprising how much they will tell you for "free".  You can also ask them what their charge would be to handle it for you and then select the one you prefere.  One never knows (even if they are not very elderly) when some sickness might hit them earlier in life and they could end up in a nursing home.  This way one can have some choices so their family will know what to do if such a problem arises.  Some people wait too long and end up under the worse conditions and no protection for family finances.

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Comment #10 by Anonymous posted on
Anonymous
Medicaid helps eliminate the need for LTC insurance, though it's still useful if you're a married couple to help prevent one person's care from draining the assets needed by the other person.  Having said that, I can't see how LTC companies will be able to survive if the insurance is such a good deal and a large portion of the participants (70% if you believe what's stated in the article) will make claims against their policy.

4
Comment #11 by Anonymous posted on
Anonymous
For those of you who say "let Medicaid take care of it".  Where do you think that money comes from?  It comes from us tax payers.  LTC Insurance is available to help take care of yourself if needed.  Don't rely on the tax payers to take care of your personal needs.  Besides big changes are in store for Medicaid, Medicare, and Social Security.  And you can be sure they will not be in the general public's interest.  

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Comment #13 by mstclair posted on
mstclair
another thing to point out is that there are certain illnesses that lead to insurance companies making one ineligible for long term care insurance forever, even if there is recovery and doctors declare that ongoing risk is no different from general population. Bottom Line - get it before you can't.

2
Comment #17 by Anonymous posted on
Anonymous
With all the policies (Life, LTC, Annuities, etc) that Insurance companies are selling, does anyone have any confidence they will really seen the policies paying off in 20 - 30 years from now?  The companies will just file bankruptcy and your policy is worthless paper.  But you can rest assure the Executives will get their golden parachutes!

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Comment #18 by Gary_C (anonymous) posted on
Gary_C
With respect to Anonymous # 17;s concern that insurers will declare bankruptcy, I also have that fear.  I bought policies for my wife and myself about a decade ago when we were both approaching 60.  I did a lot of research before choosing a policy.  At that time, I found it very difficult to compare policies because the industry standard practice was to sell a policy on the basis of a sales brochure only.  One could not see the actual contract (i.e., the fine print) until one had actualloy signed the purchase agreement.  Only then would the insurer  provide a copy oft he actual contract with the provision that one could cancel within 30 days if he didn't like the terms.  Tough to compare policies that way.  I was able to convince an independent agent to get me the contracts of several companies in advance as a condition of my purchasing a policy through that agent, but the agent made clear that she was violating the insurers' practice agreements.

I recognized when I bought that there was a great temptation to sell policfies at reasonable rates t o baby boomers who were still in their prime earning years.  I expect that CEOs of such companies made great income by doing so.  If in the payout years, 20 years or so in the future, it turned out that the insurers had been "overly optimistic" in setting rates, they could always jack up the annual rates to such levels as to force long-term customers to drop their policies, or to simply decalre bankruptcy.  In either case, the insurer would have had 20 high income years.  While state insurance commissioners must approve rate increases, in most cases, these regulators appear to be captured by the industry they are supposed to regulate.  So, as a practical matter, while I continue to pay annual premiums, I know of no way to guard against obscene premium increases or insurer bankcruptcy.

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Comment #21 by johnson (anonymous) posted on
johnson
Many consumers thought thatlong term care insurance is a waste of time and money because of its expensiveness and complexity. Some of them cannot determine the exact policy or coverage they need because of the wide range of  services, coverage and riders being offered by insurers.

It's highly advisable for someone to understand LTCi before buying a policy. One of the ways to start it is by getting long term care insurance quotes

 

1
Comment #22 by Lorie (anonymous) posted on
Lorie
Long term care insurance is expensive in nature and this is one of the major reasons why people are discouraged to purchase this coverage. Actually, there are myriad of ways to bring down your premiums and even if it is affordable, the quality of your benfits will not change. It's still enough to cover all your long term care expenses. Policies for long term care completelongtermcare.com/ is beneficial but it is not for everyone, so it's best to assess your needs first before you make a decision and purchase a coverage. 

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