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LONG TERM CARE INSURANCE (LTCI)

 

The Facts About Long Term Care Insurance (LTCI) & What Everyone Over 40 Should Know:  You are taking an important step towards securing the financial future for you and your family.  Your greatest financial risk today and in the foreseeable future is not your hospital or doctor bills, but the very high cost of long term care.

LTC studies show that between 40% and 75% of the population will need LTCI at some point in their life.  The U.S. Government Accounting Office reports that five million of the 12 million adults currently receiving long-term care services are of working age.  This number is expected to increase as advances in medical technology continue to keep people alive who would otherwise die of serious injuries.  Your risk of needing long term care is probably much greater than you realize.  Assistance may be needed on a temporary or permanent basis for performing such daily activities as bathing, dressing or cooking.  Care might be provided in an assisted living facility, an adult day care center or a hospice.  Or it might be provided in a nursing home, an extended care facility, or in your own home.  You may need long term care services if you have an illness or injury and you're not able to perform one or more activities of daily living at home, or you have an accident causing a nursing home stay, or you are stricken with Alzheimer's Disease or senility.

In 1983, Medicare began a new program called the Prospective Payment System.  Instead of reimbursing hospitals for the actual cost of treating patients, this program now pays a set fee according to 467 Diagnostic Related Groups, or DRGs.  Once a patient reaches the arbitrary number of days in the hospital, Medicare payments stop regardless of the individual patient's actual condition or the need for continuing care.  When Medicare payment stops, patients are released from the hospital as quickly as possible.  Most patients must then finish their recovery from illness or injury in some type of nursing home facility, or, when possible, arrange for nursing medical services in their own homes.

With Medicare covering only 2% of the bill, the cost is overwhelming for most.  The National Association of Insurance Commissioners (NAIC) explains, "Purely custodial care (the type of care most persons in nursing homes require) is not covered by Medicare or most Medigap policies.  The only nursing home care that Medicare covers is skilled nursing care that is provided in a Medicare-certified skilled nursing facility."  Just one year in a nursing home can cost $36,000 to $60,000.  Currently, the average cost in a long term care facility in America is $41,000 per year (in larger cities from $50 to $60,000 annually).  The average cost of a visit by a home health aide is $52.  Daily visits would cost you almost $19,000 per year.  Skilled nursing at home, to administer medication or oxygen, for example, five days per week for a year would cost you an average of $94 per visit, or $24,440 per year.   Medicaid will only pay for home health care and nursing home care if you are already "poor" or literally impoverish yourself (and your spouse).  Fifty percent of all couples and seventy percent of single persons are impoverished within one year of entering a nursing home.  The following are a few reasons to purchase LTC insurance:

            To maintain control over the care you need and your independence

            To ensure you are not a burden to your spouse or children

            To preserve financial assets

            To preserve the inheritance you have established for you family

            To retain the ability to choose between receiving care in their homes or in a facility

Most LTCI policy benefits are triggered by the loss of two ADL’s (activities of daily living) as diagnosed by a doctor.  Activities of Daily Living are functional routines that relate to one's ability to live independently.  These activities consist of ambulating, bathing, eating, dressing, transferring (moving about), toileting, continence and mobility.

Who Pays For Long Term Care?

It's not prudent to count on health care plans or the government.  Health care plans and Medicare combined pay only about 3% of the costs of long term care.  State Medicaid programs rescue only those families who descend to the poverty level.  The rest comes out of pocket - nest eggs, funds earmarked for retirement, life savings - or from a long term care insurance policy.

Who Should Consider Long Term Care Insurance?

Two of the factors affecting the cost of LTC insurance are age and health conditions.  If you are a healthy 40 year old, you should begin looking at LTC insurance quotes/illustrations and with an advisor plan when would be the best time to start an LTCI policy.  If you are over 50 years old and have assets to protect, but aren't wealthy enough to comfortably pay for long term care out of your savings, you should be comparing long term care insurance policies now.  It's especially important if there's a history of serious illness in your family.

It's very important to apply while you're still healthy.  If you do not have a long term care policy when your health situation requires you to have one, no insurance company will issue you one.  It will be too late.

These policies are usually guaranteed renewable, meaning once you qualify, you'll remain eligible as long as you pay your premiums.  Another good reason to plan ahead!  The premium is based on your age at the time you purchase the insurance - and it's usually locked in for the life of your policy.

Can You Choose The Options That Meet Your Needs?

With the better policies, the answer will be yes.  It's important to find a policy that lets you make choices, so you can customize your coverage.  Here are some key options to explore:

  • Location of care: In-home, in a nursing home, in an adult day center or an assisted living facility.
  • Type of care: Skilled nursing care, custodial care, home health aides.
  • Daily Benefit: The maximum dollar amount you can receive daily from the policy.
  • Benefit Period: The length of time you can receive the daily benefit.
  • Elimination Period: The length of time you pay for care before your policy starts paying.
  • Inflation Protection Rider: Normally a 5% annual benefit increase (simple or compound) or none.
  • Coverage of organic mental illness: Such as Alzheimer's disease.
  • Premium Payment Options: Life pay, 10 year pay, paid up at age 65 or lump-sum pay.
  • Life Time Benefit Limits: Limits on the amount the policy will pay during a lifetime.

Look Into The Company Behind The Insurance.

Because long term care insurance claims must often be paid ten or twenty years after the policy is written, it's always important to check the financial strength of the insurance company.  The best way to gauge financial strength is to be sure the insurance carrier has received excellent ratings from the industry's major rating services: A.M. Best, Standard & Poor's, Moody's, and Duff & Phelps.

By planning ahead, you'll be providing peace of mind for your family's future.  Long term care insurance policies offer a practical and affordable way to protect your assets - and your independence.

Download our checklist to help you compare long-term care policies: LTCI Policy Comparison Checklist

Let Us Use Our Experience To Help You

We want your future to be bright.  We can help you find a plan that gives you the financial resources to manage the expenses of a long term illness/accident.

We know that choosing an LTC insurance plan can be complicated, so with our experience we are able to provide the help you need and will work with you to select the long term care plan that's right for you.

 

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