LONG-TERM CARE INSURANCE
Long-Term Care Insurance helps you protect your assets and maintain your financial security should you need long-term care later in life. While no one likes to think about the escalating costs of nursing homes and other elder care expenses, planning now can provide you - and your family - peace of mind now and in the future.
What is long-term care?
The phrase "long-term care" refers to a broad range of medical and personal services. Long-term care goes beyond standard hospitalization and nursing care, and includes all the assistance you could need if you are unable to care for yourself for an extended period of time. The need for such care could be the result of a chronic illness or disability, or it could arise because of physical or mental impairments that prevent you from performing basic activities of daily living (feeding and dressing yourself, bathing, etc.).
Benefits Of Long-Term Care Insurance
A look at the statistics
The longer you live, the greater the chances you'll need some form of long-term care. If you are concerned about protecting your assets and maintaining your financial security in your later years, long-term care insurance may be appropriate for you.
This year alone, seven million seniors are expected to need long-term care. Most long-term care is provided in the home, with family and friends as the primary caregivers. While only a fraction of all long-term care is provided in nursing homes, recent studies indicate that 40 percent of Americans over age 65 will need nursing home care at some point during their lives. Ten percent will stay in a nursing home for five years or more. Looking at it another way, about 54 percent of women and 30 percent of men will spend some time in a nursing home. With life expectancies increasing at a steady rate, these figures are expected to grow in the years to come.
The national average cost of one year in a nursing home is estimated at $55,000; in some regions the cost is more than twice this amount. Medicare may cover some of your nursing home expenses, but the extent of Medicare coverage is very limited.
Home care may be less expensive, but it is still a significant expense. Having a home aide come to your house three times a week to help with dressing, bathing, preparing meals, and the like (2-3 hours per visit) will cost an average of $1,000 per month or $12,000 per year. If you need additional help (physical therapy, respiratory therapy, etc.) the cost can be much greater, and may actually exceed the cost of nursing home care.
Should you consider long-term care?
Following are some rules of thumb to help you decide whether or not to purchase long-term care insurance. They have been compiled from several experts in senior affairs, to help you make this decision. Long-term care insurance might be appropriate if you meet all of the following criteria:
- You are between the ages of 40 and 84. (Most insurance companies do not sell long-term care policies to individuals younger than 40 or older than 84, although a few companies do make policies available to those as young as 18 years of age.)
- Your household assets average more than $75,000 per person.
- Your annual income averages at least $30,000 per person.
- The cost of monthly premiums for long-term care insurance is no more than five percent of your income, and you can afford this cost without making significant changes in your lifestyle.
- You could still afford the premiums if they increase 20 to 30 percent in the future.
Once you purchase long-term care insurance, you'll always pay the same rate as someone who is currently as old as you were when you purchased the policy. The insurance company can increase your premiums, but only if they raise the rates for an entire class of policyholders. For example, if you purchase a long-term care insurance policy when you're 55, you'll always pay the same rate as a 55-year-old buying a new policy.
Keep in mind, these are only guidelines, not hard-and-fast rules. Each individual situation requires careful consideration. Medical history and estate planning issues may also play a part in your decision. And even if you decide that long-term care insurance is right for you, your task is not complete. You'll still need to decide how much coverage to purchase.