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Playing The Odds On Long-Term Care

Long-term care insurance is a little like cod liver oil. Everyone tells you it’s good for you but paying all those premiums can be hard to swallow.

LTC insurance can protect your assets — and your peace of mind. One look at the cost of a nursing home — an average of about $61,320 annually — and it’s easy to see why the number of people buying LTC policies has increased dramatically.  Policies cover extended care in nursing homes, assisted living facilities, adult day care centers, and even your home. A good policy also covers all types of care, not just skilled medical care but help with daily activities if you become chronically ill or disabled.

But LTC insurance doesn’t come cheap. Here’s what you need to know before you buy.

Who needs it
Whether a policy makes sense for you depends on several factors: your net worth, how much of it you’re willing to spend on healthcare, how much want to leave to heirs, your marital status, and your age.

Consider your family history, too. If longevity or a chronic disease runs in your family, you may be more likely to require long-term care at some point. And because women live longer than men on average, they are more likely to need nursing home or other extended care.

The idea is to buy a policy before you need one. The older you get, the greater the risk that you may develop health problems and become uninsurable. Even if you do get a policy, premiums will be steep. That’s why most financial planners suggest clients buy a policy by their mid-50s or early 60s.

In general, the richer you are the less you need a policy, and the poorer you are the more likely it is that you’ll qualify for Medicaid.  Between those poles, things get murky.

When it comes to long-term care insurance, you money pays for it
… but YOUR HEALTH buys it!

Long-term care insurance premiums are based on your age and the condition of your health when you purchase a policy. Assume a person is in good health. Consider that the average nursing home stay is 2½ to 3 years.

It may sound obvious, but make sure you buy a policy you can afford. Remember you are going to pay those premiums for years to come. If they’re too expensive, you may let your policy lapse and will have wasted thousands of dollars.  A good rule of thumb: make sure a premium does not exceed 5 percent of your current income.

Here are findings from the 2011 Long-Term Care Insurance Price Index:
Average price for a comprehensive long-term care insurance policy (100% home care benefit + skilled care coverage), 90-Day Elimination Period with Compound Inflation Protection Option (benefit increases 5% compounded annually).  The average of rates from selected leading insurers.

Age 55 – Single Individual
$150 Maximum Daily Benefit x 3 Year Benefit Period
Current Value of Benefits: $169,000 — Value of Benefits at age 75: $305,000
Cost: $1,480-per-year
Low Cost: $1,325
High Cost: $2,550
Individual Qualifies for Preferred Health and Spousal Discounts

Age 55 – Couple (both age 55 – Preferred Health – Shared Policy)
$150 Maximum Daily Benefit x 3 Year Benefit Period
Current Value of Benefits: $338,000 — Value of Benefits at age 75: $610,000
Cost: $2,350-per-year
Low Cost: $2,085
High Cost: $3,970
Individual Qualifies for Preferred Health and Spousal Discounts, Includes Shared Care Option

Age 55 – Couple (both age 55 – Standard Health)
$150 Maximum Daily Benefit x 3 Year Benefit Period
Current Value of Benefits: $338,000 — Value of Benefits at age 75: $610,000
Cost: $2,405-per-year
Low Cost: $1,985
High Cost: $3,970
Individual Qualifies for Standard Health and Spousal Discounts

Age 60 – Couple (both age 60- Preferred Health – Shared Policy)
$150 Maximum Daily Benefit x 3 Year Benefit Period
Current Value of Benefits: $338,000 — Value of Benefits at age 75: $527,300
Cost: $2,970-per-year
Low Cost: $2,605
High Cost: $4,935
Individual Qualifies for Preferred Health and Spousal Discounts, Includes Shared Care Option

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Contact LifeCall Medical Alert Systems, one of the leading providers of BOSCH in-home health care monitoring solutions for seniors and at-risk persons seeking to retain their independence and remain in their own homes.

Private Long-Term Care Insurance

Many consumers have never heard of long-term care insurance, and there’s a common misperception that long-term care is paid for by Medicare.

Big mistake. Long term care is basically “custodial” care, and it’s for those suffering the after-effects of a stroke, Alzheimer’s disease or other disabling condition.

Health insurance doesn’t pay for this kind of treatment. Medicare doesn’t either, generally speaking.

Who does? You do. The consumer pays out of pocket until his assets are exhausted, at which time Medicaid (not Medicare) kicks in. This is basically a welfare program — and it feels like it. Those on Medicaid often wind up in nursing homes, generally not a nice place to be.

Those with money or with a good long term care policy may be able to stay at home with the help of paid assistants or check into a comfortable assisted living facility.

Bottom line on The Dotted Line
It’s important to learn as much as you can before signing on the dotted line for this kind of insurance.

A good place to start is a recent Kaiser Family Foundation report. This report draws on data from the 1998 Survey of Consumer Finances and the 1996 Medical Expenditures Panel Survey to explore the feasibility of LTCI for working families and older adults. Specifically, the report looks at how many working-age families can afford LTCI, whether it is a sensible investment for people who are decades away from requiring long-term care, and how LTCI policies can be made more flexible, to keep pace with changes in long-term care delivery and financing.

The report also examines the affordability of LTCI for older people, what kind of policies make sense for seniors, and whether there are less costly products that might reach more buyers and still provide some meaningful protection.

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Contact LifeCall Medical Alert Systems, one of the leading providers of BOSCH in-home health care monitoring solutions for seniors and at-risk persons seeking to retain their independence and remain in their own homes.