LONG-TERM CARE INSURANCE

Have you ever been contacted by someone selling long-term care insurance? If you were interested and investigate it further, you may have come to the conclusion that the insurance was just too expensive. I’ve had a lot of people tell me that.

But is long-term care insurance really too expensive. For instance, are people taking into consideration the costs associated with not having insurance if they need long-term care?

After all, a large percentage of people will need long-term care. I recently heard someone say that one in every two men and one in every three woman will, someday, require such care. I can’t attest to the accuracy of those figures. Personally, I don’t believe in averages. I’ve always like the saying that if you stick your legs in a bucket of ice water and your head in a bucket of steaming hot water, on average, your temperature is warm.

What I can tell you is, a lot of people who are fortunate enough to live long lives are unfortunate enough to require long-term care.

Before I begin discussing some of the finer points of long-term care insurance, let me just say this: I don’t sell insurance. I’m an Elder Care Attorney, and that’s all I do. Until they invent an eighth day in the week, Elder Care Law is all I will do.

In recent years, the availability of long-term care insurance has become quite well-known. This increased awareness is due, in large part, to an increase in awareness of three facts: (1) many people are living longer and requiring long-term care; (2) long-term care is very expensive, with a cost ranging anywhere from $2,000 to $8,000 a month, and (3) aside from Medicaid and long-term care insurance, no government program and no policy of insurance pays for long-term care.

While the cost of long-term care insurance can be pretty high – policy premiums probably range between $1,500 to $4,000 per year – the cost of long-term care can be significantly higher. For example, if you purchased a policy of long-term care insurance when you were 70 with an annual premium of $2,500, and you required nursing home care costing $7,000 a month when you were 85 – you would have paid $37,500 (15 years * $2,500 = $37,500) in premiums over that 15 year period. Yet, the amount paid as premiums would be less than half of the cost of a year’s care at the nursing home.

There are a number of factors that affect the premium of long-term care insurance. These factors include (a) the daily benefit amount; (b) the benefit length; (c) the elimination period; (d) the inflation rider; (e) the care covered; (f) the triggering factors; and (g) the age and health of the insured.

The “daily benefit” is the amount that the insurance company will pay per day to the health care provider, for instance, the policy might pay $150 per day. So, if your care costs $210 per day, the insurance will pay $150 and you will pay $60. The “benefit length” is the length of time that the insurance company will pay the daily benefit, for example, one year, two years.

The “inflation rider” is an option that you can purchase to increase the daily benefit on a yearly basis; $150 a day may be sufficient today, but what if you don’t need long-term care for another 20 years, when nursing homes cost $400 a day? You might want to purchase an inflation rider for the daily benefit that will increase the daily benefit 5% per year.

The care that the policy covers will affect the premium. Does it cover home care? An assisted living residence? Or does it just cover nursing home care? The “trigger factors” determine when the policy will begin paying out the daily benefit. Many people do not pay attention to the trigger factors when they purchase a policy of insurance, and the affect on the premium is often negligible. But the impact of a trigger factor on the policy’s true quality can be substantial. Always consult with someone who specializes in selling this form of insurance.

Finally, your age and health when you purchase the insurance will affect the premium. The longer you wait, the higher the premium. In fact, if you wait too long, you might not be able to purchase the insurance at all. You may be too old to insure or too sickly.

The most important thing is this, when investigating this insurance, only deal with someone who is highly knowledgeable. It’s a very good product – if you purchase the policy that is right for you.