Savvy womens Magazine

Warning: You Could Lose Everything without the Protection of Long-Term Care Insurance

by Ryan Patterson, President, US Insurance Online

It's not something any of us wants to think about. Long-term care insurance is the last thing you want to buy, but it could be the protection you need for your aging parents or yourself.

Long-term care (LTC) insurance can protect your savings. The cost for one year of care in a nursing home is $40,000 to $100,000 and round-the clock home care can be just as expensive. These days, LTC insurance covers assisted living at home, and an array of social and support services, as well as nursing home care.

According to research published in the journal Inquiry, most people who've turned 65 will need some level of long-term care during their lifetime. The good news is that long-term care will likely be needed for shorter periods in the future because of better prevention strategies and medical practices.

Many people think Medicare will cover long-term care costs. The fact is; it does not. Medicare pays for short-term medical care at home or for a limited stay in a nursing home, but only after a hospitalization and only after a number of criteria are met. Medicaid pays for long-term care, but not until people have already used up the majority of their financial assets.

So unless your parents have very little money and qualify for Medicaid, or so much money they can pay all the bills out of their own pocket, they should consider LTC insurance.

If they purchase it well in advance of being used, (or you buy it for them) they can get lowered or locked-in rates. Another plus: most LTC premiums qualify for tax breaks. Remember, though, LTC insurance does not provide medical coverage. It is a complement to, not a replacement for, medical insurance.

Shopping tips for long-term care insurance:

  • Think about purchasing a policy before you or your parent reaches the age of 65. Today's healthy 50-year-old pays a yearly rate of about $1,500 for LTC coverage, while a healthy 65-year-old might pay $2,000 to $3,500. This increases in proportion to a decline in health. Overall rates are expected to increase dramatically in the next few years.
  • Read the fine print! Ask an Elder Law Attorney to check policies before you sign them. Ask whether the premium can be modified in the future (e.g., whether additional coverage may be added, how coverage is adjusted with changes in health, and whether it would remain consistent if an emergency evacuation required a move), and at what price.
  • Make sure the policy clearly states what is covered. Some policies cover nursing home care, but not assisted living; others are more inclusive. Choosing a limited type of coverage is often less expensive, but a gamble since need is hard to predict.
  • Check whether the policy includes a waiting period during which you must pay all of your expenses out-of-pocket before your LTC coverage kicks in—a kind of LTC insurance deductible. The downside is that expenses during this period (called an elimination period) may be very costly and drain what resources you have. The upside is that some companies lower their premiums in proportion to the length of the waiting period, which can be up to 100 days.
  • Look at what qualifications the policy requires for benefits to kick in. Does it require a hospital stay? What about pre-existing conditions? Does coverage change if dementia is thrown into the mix?
  • Perform a background check on the financial health of your provider. Companies such as A.M. Best and Moody's do annual evaluations on all insurance companies, reporting complaints filed for non-payment. Avoid providers with reputations for dropping clients when health status changes.
  • If your family member is a veteran, the Veterans Administration may pick up some of the expenses related to a stay in a long-term facility.
Finally, for all of these LTC options, remember the bottom line: Will your plan provide complete coverage, overall savings, and real value, or merely cut down on year-over-year cost?

About the author:

Ryan Patterson is president of US Insurance Online, a web site that serves consumers who want the best insurance policy for their needs at the lowest cost. Busy singles, active families, businesspeople and seniors all benefit from the site's wide product selection and well-organized consumer education sections. Patterson is based in Austin, Texas and graduated from the University of Texas with a combined business and computer science degree.

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