Long Term Care Insurance
Long term care insurance provides cash to pay for your care when you reach a point in life when you cannot take care of yourself and must depend upon others. The care can be home healthcare, assisted living or nursing home care. Long term care is not inexpensive. Depending on where you live it can run from a low of $40,000 to $150,000 a year after tax. Long term care insurance transfers this risk to an insurance company and puts a firewall around your financial assets.
Long term care is not just for the elderly. Nearly 40% of people needing long term care are between the ages of 18 and 54. The U.S. Department of Health and Human Services reported in 2008 that nearly 70% of all people age 65 and older will need some long term care before they die. In 2008 American insurance companies paid out $8.5 billion in claims for over 180,000 policyholders.
Long term care insurance is important because today people don’t die of the types of illnesses that likely would have killed them in the ‘good old days’. Alzheimer’s disease is increasing because people are living longer. Long term care insurance enables one to maintain independence and preserve their assets. With families living all over the country it is difficult for them to care for loved ones.
Long term care is simply assistance with day to day activities: getting in and out of bed, using the toilet, bathing, dressing, eating, and providing a self environment for those with dementia and Alzheimer’s disease. Long term care is delivered in one’s home, in assisted living facilities, adult daycare centers and in nursing homes.
Protect Your Family
The main reason for interest in long term care insurance is that adults do not want to obligate their children to provide their care. Long term care is really a family problem not an individual problem. For example, people go into nursing homes when the caregivers get overwhelmed and exhausted and are no longer able to provide care in the home. Children will take care of their parents however long term care insurance provides a way to make this care easier.
It also provides the means to care for a loved one and enable them to live a longer life. It also allows the family to have a life too. Long term care is not only about protecting the insured, it is about protecting the family.
Long term care insurance is a cash benefit. It reimburses for expenses. The type of care is selected by the insured and the family not the insurance company.
How does one qualify for a claim? A long term care policy spells out six activities of daily living. They are transference-moving in and out of a chair or bed, toileting, continence, bathing, dressing and feeding. If one is unable to perform two of these six activities except with the help of another and if his/her doctor says this is expected to last 90 days or longer, one qualifies for a claim. The second way to qualify is if one has a severe cognitive impairment defined as severe memory loss, dementia or Alzheimer’s disease.
Cost of Long Term Care Insurance
The cost of insurance is based upon five factors:
Age, health, tobacco use and family status. Companies give a discount to married people and to couples living in a committed relationship.
- Benefit Amount
Benefits can be daily ($200 per day for example) or monthly ($4000 per month).
- Maximum Benefit
These maximum benefits can run from as low as $50,000 to an unlimited benefit.
- Elimination Period
Like all policies (except for life insurance) there is a waiting period between the onset of the claim and when benefits start to accrue. The longer this elimination period, the lower the premiums. The elimination period can be none-benefits start immediately to as long as a year.
- Automatic Increase
The benefit one purchases today can be adequate today but may not be needed for many years. The automatic increase benefit will raise the benefit, not the premium, every year. Benefit increases are available from 3% to 5%.
Many optional riders are available so one may customize the coverage to one’s specific needs and premium needs. Policies are available on a limited payment basis where the policy may be paid up in as little as ten years. Several companies have policies which can be paid in a single premium.
When to Buy Long Term Care Insurance
The best time to purchase the coverage is when young and healthy. The premiums are most affordable and it is simple to qualify. Premiums may be paid by one’s business and benefits will be tax free. The deductibility will vary depending on the type of business (corporation, proprietorship etc) and the age of the insured.
There are four major risks to one’s life savings:
- Car Accident 1 chance in 200.
- Home Fire 1 chance in 240.
- Hospitalization 1 chance in 15.
- Long Term Care 1 chance in 2; however over age 65 it is 7 out of 10.