Although your focus is probably
on providing care for your loved one, it’s important to think about
and prepare for your own future caregiving needs. Long-term care
insurance (LTCi) is a hot topic these days as the more than 76
million baby boomers approach retirement. Statistics say that one
out of every two elderly Americans will need long-term care, yet
unfortunately, most baby boomers have done little in terms of
planning for the care they likely will need in the future.
With the increasing population
of elderly Americans, longer average life spans and increasing costs
of health care, it’s wise to consider LTCi as an option for when
you’ll someday need extra care yourself.
Planning for Long-Term Care
LTCi is a separate insurance
policy that covers costs that arise when an individual needs
on-going care including home care, hospice care, nursing home care
or care in an apartment in an assisted-living facility.
Although LTCi probably isn’t
high on most Americans’ lists of priorities, it probably should be.
Statistics show that 72 percent of elderly Americans are
impoverished after paying for one year of long-term care.
The average cost of a private
room in a nursing home in the U.S. is $69,400 a year according to
the Genworth Financial 2005 Cost of Care Survey. And if an
individual wishes to remain in his/her own home, versus entering
institutionalized care, the national average rate for a home health
aide is $18.58 an hour or $446 a day for round-the-clock care.
If you think that the government
or your health insurance will cover these costs, you’d better think
again.
The majority of long-term care
costs are not covered by Medicare or most health insurance plans.
Medicare only covers skilled and rehabilitative care (doctors and
nurses) and does not cover custodial care including help with
activities of daily living (ADLs). Medicaid will cover the cost of
care but only after an individual has depleted all their assets.
Many elderly Americans end up
relying on family members to provide care. Some end up depleting all
their assets and going on Medicaid resulting in a coverage that
restricts where an individual receives care. With a little planning
and available funds to cover LTCi premiums, most Americans can avoid
burdening their family with their long-term care needs and still
leave some assets behind.
Options in LTCi
According to financial planners,
people should start to think about purchasing a LTCi policy when
they reach their late 50s. Although a few employers offer LTCi
policies as an optional benefit, in most cases LTCi is a policy
you’ll need to purchase from an outside company.
Several factors will influence
the cost, but the average annual figure for LTCi is about $1,900.
The premium will depend on:
-
how long you pay
out-of-pocket until the policy
-
kicks in (often 90 days)
-
age and current health
situation
-
the amount of coverage
you can afford and how
-
much you’ll need to
cover the average costs of
-
care in your area
Before purchasing a policy, it
is important to find a financial planner or insurance agency that
specializes in long-term care planning and talk to them about the
options.
Some things to consider:
First decide if LTCi makes sense
given your current situation. If you have a large amount in assets,
you’ll probably want to purchase a policy to protect your assets.
However, if you can’t afford the premiums without changing your
current lifestyle, then it might not make the most sense for you.
Make sure that the policy you
choose does not have a hospitalization requirement prior to service
kicking in. If it does, you might save on premium costs but could
end up paying a steep bill before you can access the benefit.
Make sure the policy you choose
takes inflation into account. You’ll want a policy that has a
compound inflation protection benefit increase (usually around 5
percent) to cover rising prices.
Once you’ve decided on the type
of coverage and plan you need and can afford, then look at the
companies offering such policies. You’ll want to be sure you’re
choosing a solid company with a proven track record in LTCi.
Established companies include MetLife and Genworth Financial.
Although LTCi is still fairly
new, experts predict that its popularity will continue growing as a
viable option for preparing for retirement. With government programs
in crisis mode, there are several bills pending in congress that
encourage people to buy long-term care insurance. In fact,
twenty-six states now grant tax deductions for purchasing LTCi
policies.
Cheryl Smith is the president of
Kansas City Home Care, Inc. Smith founded the agency in 1989 in
response to a need for high quality, reliable private in-home care
services and care management. Smith is a gerontologist and is a
long-standing member of the National Association of Professional
Care Managers (GCM), founding member and past President of the
Midwest Chapter of GCM and serves as Director of Communications and
Events on the Board of the National Private Duty Association. For
more information call 913-341-4800 or visit www.kchomecare.com.
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