WHAT YOU NEED TO KNOW ABOUT LONG TERM CARE INSURANCE
INTRODUCTION:
The cost for nursing home care and other chronic care services has continued to soar during the last ten (10) years. The population as whole is getting older. Therefore, a large portion of the population will eventually need some form of long-term-care services during their lives. Many people worry how they are going to pay for this care and what this will do to their life savings. Long Term Care Insurance can be a viable option to finance this care. However, it is important to have a basic understanding of Long Term Care Insurance to start you on the process of determining whether Long Term Care (LTC) Insurance is right for you.
QUESTIONS:
1. What is long term care insurance?
ANSWER: First before we talk about LTC Insurance we should discuss what is meant by the term long term care. Most people usually associate the term with care in a nursing home only. That's true, but it also includes a continually changing array of services designed to help people who are having trouble living independently because of chronic illness or cognitive impairment. Long term care should meet a person's medical, social, financial, and housing needs.
2. Can you describe the range of long term care services available?
ANSWER: The following services are available:
- Nursing home care
- Assisted living facilities
- Home health care which is medically relatedPersonal care in the home(ie. Cooking, cleaning, chores, and hygiene)
- Adult day care programs or other community based services.
Because the population as a whole is getting older, more and more of the elderly are resigned to remain living independently in a home setting environment. Many of the above services can help accomplish this goal. For many people Long Term Care Insurance is a vehicle which can help them meet this goal.
3. Again, what is long term care insurance?
ANSWER: Long Term Care Insurance is an insurance product designed to pay for those long term care services for a fixed period at a predetermined amount per day. But the REAL QUESTION is why? a. To ensure the quality of care you receive. Long Term Care Insurance gives you additional options and flexibility for your care. b. The #1 reason is that Long Term Care Insurance can help protect your life savings so that you can pass assets on to your family. Many of us have heard the horror stories from friends who know people who have lost their life savings and even their homes because of a nursing home admission.
4. Is Long Term Care Insurance right for me? Is it something I need?
ANSWER: I can give some simple tips to help a person decide whether or not they should consider Long Term Care Insurance:
Don't Consider:
- Can't afford premiums
- Have limited assets
- Only source of income is Social Security or Supplemental Social Security Income
- Currently having trouble paying bills
Do Consider:
- You have significant assets to protect ($100,000, excluding your home)
- Desire to remain independent from the support of others
- Want to pay for your own care
5. What are the chance that a person will really need it?
ANSWER: I will give you some statistics as to the probability that a 65 year old will spend any amount of time in a nursing home during the rest of his or her life.
- 1/3 of men will spend some time in a nursing home
- 1/2 of women will spend some time in a nursing home
Remember this is for nursing home care only. It doesn't take into consideration those people who get care at home, in the community or at an assisted living facility.
If you break the statistics down into those persons who spend one year or more in a nursing home the percentages are not as daunting but they are still pretty significant.
MEN 14% - WOMEN 31%
6. What are the costs involved for long term care?
ANSWER: A nursing home costs well OVER $90,000.00 a year in Massachusetts. (As high as $280 per day)
- The average cost of an assisted living facility is $40,000 a year.
- The cost for 24 hour skilled home care can cost as much or even more than a nursing home.
- The average cost for unskilled personal care two hours, three times per week) is $7,800 ($50 per day)
7. Those are big numbers. Who pays for these long term care costs?
ANSWER: Three ways: It can be any one or a combination of all. The three ways are:
- The government through the medicaid system, (not medicare) 70% of all Long Term Care is paid by this system.
- Private pay; get out your checkbook and deplete your savings.
- Long Term Care Insurance
8. What are the main provisions to look for in a policy?
ANSWER: Policies usually have a set term. That is, over what period of time benefits will be paid. The longer the term the higher the premium. Most policies usually run 1 to 3 years.
Another important feature is the amount per day of care you are going to receive and this can range from as low as $50.00 per day up to and over $200.00 per day. It should be noted that most policies have an elimination period. That's the period of time before your benefits will begin. The longer the elimination period, the lower the premium, usually 30 day to 1 year).
9. How about the costs of Long Term Care Insurance? Are the premiums really high?
ANSWER: It's not unusual for policies to cost several thousand dollars in premiums per year. Premiums are based upon: a) Your age at time of purchase b) Type and amount of benefits selected.
10. Any other common features I should know about?
ANSWER: First you should know that policies are guaranteed renewable as long as are your premiums are paid.
Inflation protection is another option. The problem is you may not need to use the policy for 10-20 years. So if you purchased a policy with a daily benefit of $150, in 15 years from now it may cost $300 per day for long term care. Therefore you will have to come up with the difference or apply for medicaid if you are eligible. The inflation protection option increases the daily benefit amount on annual basis using a fixed formula (ie. 5% simple or compound).
A nonforfeiture option allows for the return of a portion of your premiums if the policy is allowed to lapse or for reduced benefits based upon the amount of premiums previously paid. I can go on talking about the different options. But suffice it to say the more options you buy the higher the annual premium. It's like buying a car.
11. When will I become eligible?
ANSWER: This is extremely important to know. Many people are suspicious of insurance companies. Payment of benefits is based on benefit triggers. A benefit trigger is the term used to refer to those conditions by which you become eligible. Essentially certification by a physician that you can not perform at least 2 (sometimes 3) of activities of daily living. Basic day to day functions: bathing, continence, dressing, eating, toileting, transferring, and cognitive impairment.
12. Can anyone buy a long term care insurance?
ANSWER: The insurance companies are in business to make money. So if you're a high risk because of health problems you will be turned down. (re: Alzheimers, Parkinsons, MS, Dementia)
13. Do you have any tips for people shopping for long term care insurance?
ANSWER:
- Speak with at least 2 different companies.
- Take your time, understand the policy.
- Do not be rushed into purchasing a policy because of an upcoming birthday.
- Never pay with cash.
- Complete the application yourself, accurately and truthfully.
- Review the policy again during the free look period.
14. Where can a person get educated on this subject before speaking to an insurance agent?
ANSWER:
a. Contact your insurance agent or the Division of Ins. at (617)521-7777 and ask them to send you a copy of a guide called "Your Options for Financing Long Term Care."
b. You can also call the Nat'l Assoc. of Insurance Commissioner's at (816)842-3600 and ask them to send you the "Shopper's Guide to Long Term Care Ins."
c. Free quotes for the top 15 plans can be obtained by contacting Long-Term Care Quote, a national resource center recommended by Consumer Digest, USA Weekend and on NBC at (800) 587-3279 or visiting their website at www.LTCQ.net.