PREMIUM SEARCH Search by job title, geography and build a list of executive contacts
My attitude toward long-term care insurance is probably typical of most baby boomers: I don't need it. But when my mother-in-law recently turned 60, the concept of long-term care suddenly pierced my consciousness. I realized that even if I still think I'm too young at 40 to purchase a policy, my aging in-laws and father aren't. With the annual cost of nursing-home care topping $50,000, I think about who would be likely to bear that financial responsibility, and that would be my family.
Between my husband and me, I'm the one thinking of the future care of our parents. But the issue of long-term care has special resonance for women. On average, women live longer than men, so they're more likely to require help in their later years. And women make up more than two-thirds of those who provide care for an aging relative. In fact, 12% of women who become caregivers leave their jobs afterward. "Care-giving has the potential to become a glass ceiling for women," says Phyllis Shelton, who wrote Long-Term Care Planning Guide (Shelton Marketing Services, $19.95, http://www.ltcshelton.com) and is president of LTC Consultants, a Nashville firm that trains agents who sell long-term care insurance.
A long-term care insurance policy is one way couples, and women in particular, can protect themselves and aging relatives from the financial and emotional stress of long-term care. This form of health coverage is for those who need costly custodial care at home or in an assisted-living facility but have too much money to qualify for Medicaid. "It gives you freedom of choice," says Robert Pearson, CEO of CareQuest, a Madison (Wis.) consulting firm specializing in long-term care planning. Medicaid only pays for a nursing home.
The younger you are, the cheaper the premiums. At age 45, you'll pay about $500 for a decent policy. Your premium will be locked in at that rate, but you'll make payments for 30 years that will rise with inflation. At age 70, you'll start at $3,000 a year.
THE RIGHT TIME.
Consider the cost-benefit calculation: Say you're 50 years old and you buy a good policy for an annual premium of $1,000. If the price rises 5% each year, at age 80, you'll have paid about $66,000 in premiums. You'll receive a lifetime benefit of about $500,000. Now take that initial $1,000 and increase your annual investment by 5% for 30 years. With an annual portfolio appreciation of 8%, you would have a pretax amount of nearly $200,000 at the end of the 30 years to do with as you please. But let's say you had a serious illness at 70. Don't you think you'd be better off with the policy?
Most experts recommend that you think about a policy at 55 or 60. But you should consider your family history when making your decision. If Alzheimer's or Parkinson's disease runs in your family, you might want to buy a policy sooner rather than later.
This type of insurance, however, isn't for everyone. If you're elderly and have an annual income of less than $35,000 and assets of less than $75,000, excluding your home and car, then you probably shouldn't buy a policy. Not only will the costly premiums be a burden but you will also be likely to qualify for nursing-home care through Medicaid. On the other hand, those who have a couple of million dollars stashed away for retirement should be able to finance their own long-term care. These policies are probably most appealing to middle- or upper-income individuals who would nonetheless struggle financially to care for a disabled spouse or relative.
If you shop for a policy, there are a number of variables to consider. Make sure you research the following options: benefit period, daily benefit, elimination period, inflation riders, and benefit triggers. The benefit period is the number of years of coverage. Policies can run a number of years or for your lifetime. The daily benefit is the maximum dollars per day that the policy pays. You should figure on about $130 per day. Make sure you're covered for home care, although many policies pay only half the daily maximum for such service. "Don't get chintzy on home health care or else you'll end up paying for it out of your own pocket," recommends Pearson. Find out what percentage of the daily benefit can be applied to home care and whether the plan covers unlicensed caregivers.
EASY RIDER.
The elimination period is the number of days of care you'll have to pay for before your policy kicks in. If you can handle 100, you'll pay a lot less. Definitely purchase an inflation rider of at least 5%. You're likely not to have to use the policy for a while, but you want to make sure it maintains its purchasing power. And finally, research the benefit triggers. Most policies don't kick in until you're unable to perform by yourself two or more of the activities of daily living, such as getting dressed, eating, or using the bathroom.
Find a knowledgeable agent to talk you through the options and show you price quotes from several companies. Shelton suggests buying a policy from a company that is rated A- or better by insurance rating agent A.M. Best (or the equivalent by another rating agency) and has at least $2 billion in assets. Also ask your agent to inform you of companies that insure high-risk individuals or are too liberal with benefit triggers. Either could lead to financial problems in the future, and you want your insurance company to be around when it comes time to pay your claim.
If you can afford it, Pearson recommends buying a guaranteed purchase option. This allows you to beef up your policy if need be. Because new care opportunities may be available in 40 years, you want to be sure to have the flexibility to purchase them.
No one really likes to think about what's going to happen in old age. But it's a lot easier to talk about and plan for it when everyone is healthy and you have more options. I recently told my in-laws and father that it's time we sit down and discuss long-term care. They grumbled, but thank goodness they're willing to listen.
What Long-Term Care Insurance Can Cost
This policy pays $100 daily benefit and $3,100 per month
of coverage
Age Annual With Couple's With Good With Both
Premium Discount Health Discounts
Discount
Copyright 2000 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
