What is the
Definition of Long Term Care Insurance?
In general, it is that insurance which compensates the insured
for the cost of long-term care. And long-term care, though it
can take myriad forms, is basically assistance beyond medical
care, surgery and hospitalization, for people with chronic
disabilities to maintain their well-being, if not their health.
That is how the
AARP defines the term and financial expert, Clark Howard concurs.
As stated, the degree of long-term care one might purchase
varies to a considerable extent. It should be factored in with
the projected needs and, to a lesser extent, budget of the
potential purchaser. These degrees range from home care, which
is administered in the insured’s own home, to a full-service
nursing home. A more detailed description of these options will
be under another heading. Suffice it to say that, as the
intensity of care increases with each option, so will the cost
of the insurance.
Video: Planning Ahead for Long Term Care
What are your options?
The most fundamental option is whether
to buy the LTC insurance or not. If you are a reasonably healthy
middle-aged person, then it is probably something you may wish
to seriously consider, but it is not yet a foregone conclusion
that you must go right out and buy some. In favor of the idea is
the concept that, according to the Senior Journal, nine million
people over the age of 65 will require long-term care today. By
the year 2020, that number will be twelve million. And that care
Home care, where, as mentioned, the assistance is administered by
visiting caregivers in the patient’s own home, can cost about
$28,000 a year in today’s dollars. An assisted living facility,
which is like a small apartment for the patient, with care
facilities available on the grounds, may run around $36,000. A
nursing home can set you back at least $50,000, according to
Dave Ramsey, or maybe as much as $75,000, according to the AARP.
If you require extraordinary care, the cost can only escalate
from there. Back in the day when we were expected to be dead at
age 65, perhaps a single year’s outlay of $75,000 might not be
ruinous, but most people who live to be 65, these days, live
well beyond that age. Many live into their 80s and 90s, with
centenarians becoming an ever-increasing portion of the
population. That could amount to a lot more money than even a
prudent investor may have managed to put aside.
On the other side of the coin, by no means does everybody die
in a nursing home. Millions of people, even discounting those
who died violently, managed to live their lives in their homes
and die either there or in a hospital. And LTC insurance is not
cheap. Premiums can range from about $700, for minimal coverage,
to upwards of $5000 a year for a premium package. The average,
according to AARP, ranges between $2000-3000 a year. If we were
to assign the cost at $2400, for estimation purposes, then, you
should consider, does your monthly budget have room for a $200
outlay? If so, then you may want to look more favorably on the
concept. If it means that you are going to have to do without
something important (like prescription medicine) or withhold
something important from a family member (like tutoring for a
child), then you may want to re-think the matter. One very
important point to note here is that, if you do decide to buy
this insurance, do not dilly-dally until you are 70 or so.
Everyone agrees—Clark Howard, Dave Ramsey, the Senior Journal
and the AARP—that by then, it’s too late. You need to get
started with this program in your mid 50s or, at least early
60s. By the time you reach 70, if LTC insurance is available at
all (which it may not be with many carriers), it will be
Video: LTC - The Exorbitant Costs of Long
Here are some of the factors you might want to weigh in
determining whether to buy LTC insurance or, if so, what type.
What is your family history? Consider, not only whether your
blood relatives have needed long-term care of any sort, but
their life-spans, absent destructive behavior, such as smoking
or excessive drinking. In other words, how likely are you to die
in your own bed? Consider your own financial situation. If you
are a multi-millionaire, you can afford to play the odds, unless
your family history points with a degree of near certainty to
the need for long-term care. On the other hand, if you think you
will be getting by only on
Social Security by then, you can look to Medicaid for
coverage, but you should not expect to be put up at the Ritz.
Medicaid, or any
similar government program, will not help you as long as it is
determined you have assets you can spend. Anything between those
extremes may leave you vulnerable.
What the Financial Experts Say
For the most part, they are for it. Both Dave Ramsey and
Clark Howard agree that you should get started in late middle
age and not wait until it is too late. Both agree that, having
to go into a nursing home, uninsured, with insufficient personal
assets can wipe out your nest-egg completely. The other group
sources confirm this.
Howard makes a very strong point of
stating that bad insurance is worse than no insurance at all.
Both he and the AARP agree that the prospective insured needs to
be very careful, not only in the overall choice of a company,
but in what that insurance carrier offers in the way of LTC
coverage. The consumer should
make sure any policy has or allows for inflation protection;
provides a sufficient benefit period (length of time);
require hospitalization to begin receiving benefits; cannot be
cancelled as long as the premiums are paid; covers all
preexisting conditions that were disclosed at application;
covers dementia. Those are the minimum protections for a sound,
ethical policy. If the consumer consults with one of the very
reputable companies that offer this coverage, he or she is
likely to find these protections and more.
Your final answer: yes, you must go out and buy LTC insurance,
or no, you ought not to do so is in your hands and pocketbook.
In fact there is not even a presumption of how much or what kind
of such insurance you should buy if you do. In closing, though,
you should keep two things in mind. First, it’s insurance, not a
soup kitchen. It’s run to make a profit for the owners and
shareholders of the companies who sell the policies. Like any
other kind of insurance in the world, if you buy it, there is a
good chance they are going to make a buck off of you. Second, is
that so terrible? What you are getting for your premium dollar
is, not just someone who may possibly feed you soup when you are
too feeble to feed yourself, many years down the road, but the
peace of mind that comes from knowing that you will not be a
burden and a disappointment to your heirs and yourself.
Clark Howard has taken the trouble to compile a list of the most
trustworthy LTC insurers. Here are the ones he rates as the
John Hancock Life Insurance Company
MassMutual Financial Group
State Farm Life Insurance Co.
USAA Life Insurance Co.
Northwestern Mutual Life
New York Life
He gave the following companies a rating of “Honorable
GE Life/Genworth Insurance Co.
Metropolitan Life Insurance Co.
Hartford Life Insurance Co.
Ameriprise (formerly IDS) Co.
According to the New York Times, the three companies you do
not want to purchase LTC insurance from are: