Long-Term Care Insurance: Most Need It But Few Understand Why

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging;  Public Health
Article Date: 02 Aug 2006 - 0:00 PDT

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When you think about your plans for retirement, a nice place to live, traveling, playing golf and leaving an inheritance for loved ones may all be part of your plan. Sounds lovely. But what will happen to your plan if you become unable to care for yourself due to an illness, accident or maybe just the effects of getting older? You'll need some type of long-term care, and that won't come cheap.

"The reality is that 60 percent of Americans who reach age 65 will someday need long-term care services and in many parts of this country, these services can cost more than living in a five-star hotel," said David F. Woods, CLU, ChFC, president of the LIFE Foundation. "People need to learn more about long-term care insurance and understand the chance they're taking by not insuring themselves against the risk of one day needing assistance with the tasks of daily living. Delaying or avoiding the decision to buy a long-term care insurance policy can mean the difference between living your retirement years on your own terms or facing some very difficult financial realities."

To encourage people to evaluate their long-term care insurance needs, the nonprofit LIFE Foundation urges Americans to avoid five common excuses people give for putting off a long-term care insurance purchase. As with any insurance decision, LIFE advises that consumers meet with an agent to learn more.

Excuse #1 - I can't afford it

This is the most common reason given for not owning long-term care insurance. Yet according to LIMRA International, a market research organization, people who have never shopped for policies overestimate the cost by as much as five to 10 times. Start evaluating coverage options when you first start thinking seriously about retirement, which experts say should be in your 40s or early 50s at the latest. Long-term care insurance can be quite affordable, especially if you buy at a relatively young age. LTC Consultants estimate that $1,800 a year in premiums would buy a 40-year old couple three years of benefits at a daily payout of $140. If that same couple waited until they were 50 to buy, they would be paying $3,900 a year.

Excuse #2 - I won't need it

According to the Centers for Medicare and Medicaid Services, about 10 million people of all ages already need help with the basic tasks of daily living, and that number is projected to increase sharply as the population continues to age. "Aging can be a steep emotional hurdle to face, however people need to recognize that today's long-term care environment isn't the same as what their grandparents experienced," said LIFE Board Member Deb Newman, CLU, ChFC, LTCP, President of Newman Long Term Care.

"Most people will need long-term care and there are wonderful care options today, but only to those with the means to pay for them and that's where long-term care insurance can be so essential."

Excuse #3 - My health insurance, Medicare or Medicaid coverage will pay for my care

Don't count on it! Health insurance only pays for doctor and hospital bills and maybe your prescription costs. Medicare only covers short-term rehabilitative care that you receive after being hospitalized for at least three days. Medicaid, on the other hand, does pay for long-term care services but will only pay for care if you have very limited assets and meet federal poverty guidelines. Moreover, having Medicaid pay for your care also means you may not have much of a say in choosing the facility that will provide your care.

Excuse #4 - My family will take care of me

Family members are often the first line of defense for loved ones who need long-term care services, but this is often not a permanent or wise solution. "Most people don't want to depend on their loved ones to care for them for the long-term," said Newman. "Those in the 'sandwich generation' especially, who are currently taking care of both their aging parents and their growing children, know the emotional and financial burden caring for loved ones can bring. People should take steps now to make sure that when the time comes, not all the responsibility of caring for them will fall on the shoulders of their children or siblings."

Excuse #5 - The buying process is too complicated

Long-term care policies do have a multitude of options and features, which is why it is important to seek assistance from a qualified insurance professional who specializes in these products. When you meet with an advisor, pay particular attention to these five key product features:

-- Daily benefit - This is how much the policy will guarantee to pay you for covered services once your claim is approved. The amount of coverage you will need is largely based on the average cost of care in your area.

-- Elimination period - This is the amount of time required before the policy will begin making payments. Most policies have zero, sixty, ninety, or even one-hundred and eighty day elimination periods. The longer you're willing to wait before benefits begin to be paid out, the cheaper the premiums will be.

-- Maximum benefit - This is the total amount the policy will pay once the elimination or waiting period has been satisfied. Many policies will pay benefits for one, two or three years, and some will pay for a lifetime. The length of your benefit your purchase usually comes down to what you can afford. The longer the better.

-- Types of facilities covered - Today, most policies will pay for care rendered in a range of settings such as at home by a health aide, or in an assisted living facility or nursing home. You'll want to make sure that all these choices will be available to you, especially the option of receiving care at home, where most people prefer to live for as long as they can.

-- Inflation protection - Experts strongly recommend this because it protects your policy from rising costs for care, due to inflation. Most companies offer either 5% compound or 5% simple inflation. If you can afford it, the compound-interest option can make a big difference in helping your benefit keep pace with the rapidly rising cost of care.

For additional information and helpful tips, visit the section of LIFE's website dedicated to long-term care insurance at http://www.life-line.org/longterm.

About LIFE

The Life and Health Insurance Foundation for Education (LIFE) was founded in 1994 in response to the public's growing need for information and education on life, health, disability and long-term care insurance. LIFE also seeks to remind people of the important role insurance professionals perform in helping families, businesses and individuals find the insurance products that best fit their needs. To learn more about these topics, please visit http://www.life- line.org.

The Life Foundation
http://www.life-line.org/longterm
http://www.life-line.org

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