Long-term care insurance explained: part 2

In our most recent blog post, we introduced you to long-term care insurance and explained risk management and how to evaluate a policy, including factors to consider. We continue our discussion below, beginning with benefit flexibility. Benefit flexibility A comprehensive policy may be purchased that covers the individual in a nursing home, adult day care center, assisted living facility, his or her own home, or just about any other setting. Or a nursing home only or home care only policy may be purchased. Most policies will pay 100% of the daily benefit for skilled care, but many policies will reduce the percentage they pay if care is received for custodial care. Some policies will also reduce the benefits depending on where the care is received. For example, it will pay 100 percent for care received in a nursing home but only 80 percent for assisted living. Further, many polices allow the client to choose a lower coverage rate in order to keep the cost of the policy down. In this situation the policy may pay 100% of the daily benefit for nursing home coverage and the client could choose a 50% or 80% rate for home health care. As long as the coverage is affordable, it is wise to have a policy that pays 100% at any level of care and 100% regardless of the care facility. This way the client can choose where he/she will receive care at the time of claim as opposed to at time of application. Benefits are paid usually in one of two ways. A policy can be designed to pay for expenses actually...

Long-term care insurance explained: part 1

As a person ages, insurance for long-term care will be a welcome lower cost solution as current costs for care in a nursing home is about $70,000 annually. Our elder population is growing as the Baby Boomers enter their retirement years; before long there will be a significant impact on end-of-life health issues, and mortality rates will increase as this generation becomes ill and dies. Elderly people typically require assistance with daily activities such as eating, bathing, dressing, etc. This type of care is called long-term care, and may be administered by family members, or in a variety of assisted living facilities. Because the costs for long-term care can be exorbitant and can quickly deplete assets, and because standard health insurance policies exclude long-term care benefits, long-term care insurance can mitigate the effect of excessive expenses. Risk management Long term care insurance is available to manage the risk of enormous expenses, typically in the later years of a person’s life when they are living on a fixed income. The risk is great, because most people will not be able to afford the exorbitant cost of the care they may need, and their entire estate can be consumed. Some careful thinking about and planning for this very likely situation is mandatory. An analysis of the risks associated with long-term care reveals that the only choices available to an individual considering the financial impact of elderly needs are purchasing an insurance policy, or self-funding the costs. A third choice, dispersing your estate to rely on the resources and mercies of Medicaid, is an unappealing alternative. There are three categories of people...