Saturday, April 16, 2011

Why long-term care insurance is a big deal, especially for women

Note from Julia: A friend of mine proudly announced the other day that she and her husband had recently purchased a long-term care insurance policy that would cover the costs of either or both of them going into a care facility or needing in-home support. They are in their late 60s, have already sold their suburban home and relocated to a high-rise condo. They are semi-retired.
For them, long-term care insurance means protecting their substantial assets for their children. For others it may offer an alternative to moving in with a grandson. Long-term care insurance is a complicated topic, which until now, I've avoided at sixtyandsingle.com. The industry is in flux, rates are changing and new products are coming on the market. But after an in-depth conversation with a couple of people working in the industry and online research, I've feel confident enough to share what I've learned so far. Women have more reason to buy this coverage than men since we may have fewer assets but live longer on our own. First have a conversation with your family about the long-term care issue and how you would like to see it handled when the time comes (if it comes). If you then decide to buy long-term care insurance, below I offer questions to ask, helpful Web sites and an some analysis.

What is long-term care insurance? Long-term care insurance is a type of insurance developed specifically to cover the costs of long-term care services, most of which are not covered by traditional health insurance or Medicare. These include services in your home for such daily living activities as bathing, cleaning and food preparation. - U.S. Dept. of Health and Human Services.

PART I: Questions for a family discussion about long-term care.
1. If you needed care today, do you have a family member who would be the care giver? If so, have you discussed this with them as to how it would work for both of you?
2. Where would you like to have care provided? If you stay at home, is there a time that you feel you would need to move?
3. Have you communicated your wishes to anyone, if so to whom?
4. How would you pay for care today if something unexpected happened to you?
5. Are your assets large enough that they should be protected by insurance?

Helpful Web sites:
U.S. Dept. of Health & Human Services: http://www.longtermcare.gov/
American Association of Long Term Care Insurance: http://www.aaltci.org./
National Association of Financial Planners: http://www.nafep.com/
“Why Long-term Care Insurance is a Women’s Issue” http://www.wife.org/
Northwestern Mutual: http://www.northwesternmutual.com/
http://www.ltcinsurance.com/
http://www.smartmoney.com/, use the search box.
"How to Avoid Claims Snafus" from the Wall Street Journal, 2011.

Long-term care report by Julia Anderson at sixtyandsingle.com.
If something happened to you today— an injury from a car accident, a Parkinson diagnosis, a debilitating stroke, early onset of Alzheimer’s disease – how would you pay for the years of long-term care that might be needed?
Or, what if you live into your 90s, are on your own and at some point can no longer stay by yourself?
People 50 and over are asking these questions as they face retirement and make plans for living into their old age. Americans can expect to live an average 78.2 years, an all-time high, said the U.S. Centers for Disease Control & Prevention earlier this year.
But what if you can’t live on your own? The cost of a care facility, nursing services and even in-home house-cleaning and cooking services can easily add up to thousands of dollars a month. These costs are increasing at twice the over-all inflation rate, government research shows.
According to a recent Wall Street Journal report, Americans over the age of 65 face a 40 percent risk of entering a nursing home for long-term care services at some point before they die.
A year in a nursing home now averages more than $40,000 and can be much more expensive. One year of care at home, assuming you need periodic personal care help from a home health aide (the average is about three times a week), would cost almost $18,000 a year, a U.S. Department of Health & Human Services report said..
So do you bet that your good health and good genes will keep you out of a home or should you look into buying long-term care insurance now to avoid a financial meltdown later?
Single people, especially women, may feel especially vulnerable because without a spouse or other family member to help out, dealing with a chronic illness or the challenges of aging can get expensive. There may be no choice but to enter a care facility.
Because women are most often primary caregivers for elderly parents, they may be more likely to understand the difficult decisions that must be made about long-term care and related costs. For some, purchasing long-term care insurance may be the answer.
According to http://www.longtermcare.gov/ a Web site managed by the U.S. Department of Health, long-term care insurance is designed to cover care costs, most of which are not covered by traditional health insurance or Medicare. These include services in your home or similar services in an assisted-living or nursing care facility.
Many consumers ask these questions:
Can I afford long-term care coverage?
Or can I afford to not have it?
Insurance industry experts say Baby Boomers with assets should consider purchasing long-term care insurance sooner rather than later as part of their over all financial and retirement planning.
While we tend to think that long-term care is for a person significantly older, a sudden diagnosis could change everything.
Protecting Your Net WorthCandace Bahr and Ginita Wall, writing at their Web site http://www.wife.org/ say you need long-term care insurance if your net worth is between $75,000 and $3 million. If your net worth is below $75,000, Medicaid (government assistance) will pay for your care as soon as your assets are depleted. If your net worth is over $3 million, it may be cheaper to pay for the care yourself.
Bahr and Wall suggest that those with a family history of chronic memory loss, liver cirrhosis, muscular dystrophy, Parkinson's disease, Alzheimer's disease, senility or dementia, or multiple strokes should consider coverage.
“If these diseases run in your family, chances are greater than average that you will need long-term care at some point,” they say. The bad news is that if you already have any of the above symptoms or diagnoses, you may not qualify for long-term care insurance.
Typically, people buy long-term care insurance between the ages of 50 and 65. Costs go up the older that you are.
Buying Long-Term Care Coverage
The insurance industry offers a great deal of choice and flexibility in long-term care insurance coverage. Premium costs are based on the type and amount of services you choose to have covered, how old you are when you buy the policy, and any optional benefits you choose, such as inflation protection.
When shopping for coverage don’t jump right into the contract, say the experts. Look at the plan and all of its features. Some plans will provide monthly long-term care benefits of as low as $1,500 while others will provide benefits of $12,000 a month.
Meanwhile, the long-term care insurance business is in flux because some companies were losing money on policies that were sold at prices too low to cover payout costs. For example, Manulife’s John Hancock has asked for a 40 percent rate increase. Others have stopped selling the coverage all together.
According to a recent Wall Street Journal report, the annual average premium cost is about $1,450 for someone 55 and older buying three years of comprehensive long-term care coverage with a $150-a-day average benefit.
For someone in their 60s, the cost for six years of coverage with an inflation option will cost about $2,400 a year.
When building care costs into their long-term retirement planning, consumers may want to use some of their own assets in combination with insurance coverage. Price should not be the only factor in the decision.
Women, especially, often ask how much long-term coverage will cost, rather than what’s the need. Since women typically outlive their spouses, their need may be greater. It’s worth a family discussion.
Census data show that nearly half of American women 65 and older are on their own, financially.
Like all investment decisions, buying long-term care coverage requires homework. Do your research, talk to several insurance professionals about what they offer before making this investment. Among the most valuable research Web sites is www.longtermcare.gov, developed by the U.S. Dept. of Health & Human Services. Here you will find unbiased consumer information.
Look for quality products and service. Deal only with companies that have a long track record. Research the premium rate history of the company. Ask your agent for the percentage of claims paid by the company versus the amount of claims filed.
Get all your questions answered, then share what you’ve learned your family.
Determine what works for you and for them.

Six Questions to Ask Brokers When Buying Long-Term Care Insurance:
1. What is the size and reputation of the company selling you the coverage? Recommendation: Work with large, high-rated AAA companies with a long track record.
2. Discuss in detail the range of coverage options and their costs. According to SmartMoney.com the average annual premium for the 7 million LTC policies in force is $2,100. Recommendation: Read the fine print, go over the plan. Ask exactly what the policy will cover and what it won’t.
3. Will your agent put everything in writing that he/she is telling you?
Recommendation: Make sure that what you hear is in the actual insurance contract.
4. Ask your agent how much he/she earns on the sale of insurance contract to you? Recommendation: This is not a touchy question. It’s your money.
5. Does this plan allow policy rate increases? Has the company ever raised rates?
Recommendation: Some companies have been losing money on long-term care insurance and have asked for rate increases of as much as 40 percent.
6. What is the length of coverage? Recommendation: Six years is a good minimum.
Sources: www.wife.org; American Association of Long Term Care Insurance.

3 comments:

  1. I found this article very up-to-date and informative as it provides excellent tips to obtain the best possible long term care insurance rates and quotes. With this handy information, you are able to make your decisions more wisely and obtain the best long-term care insurance plan for yourself. It highlights the importance of having long term care insurance especially for the people above 65 years of age in helping them to plan for their long-term care needs.

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  3. I really love your writing, unlike most blogs I actually learn things, find the content useful and it’s well written. 11/10 every time!

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