Is long-term care insurance right
for you?
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You have
three basic options, says Don Rosenberg, an
attorney with Barron, Rosenberg, Mayoras and
Mayoras PC, The Center for Elder Law. "You
have to be rich. Or be poor, and go on Medicaid.
Or you can plan."
Barron puts it much the same way. "You can either
have the insurance in place or you can self-insure. Self-insuring means you pay
out of pocket and hope you've accumulated enough wealth in your life to cover
the cost of your care and not impoverish a spouse if there's still one living."
The third option is Medicaid, he says, "which essentially means spending
down your assets and working with an elder law attorney to protect what you can."
Clearly
the preferred options are either to be so wealthy you don't have to worry about
spending thousands of dollars on long-term care, or having insurance. Although
a relatively new concept, long-term care insurance is becoming increasingly common,
and the government's recent measures certainly encourage it.
Randolph
J. Shine with Shine Financial Inc., in Deerfield Beach, Fla., traces the popularity
of long-term care insurance to the Kennedy-Kassebaum Act, passed in 1996. Prior
to the signing of this act, it was possible to distribute assets to family members
in order to protect the income and go on Medicaid or other assistance. The Kennedy-Kassebaum
Act and the recent Deficit Reduction Act make it more difficult to give away assets
and apply for Medicaid. "The government flat-out said, 'We are not going
to be responsible for providing long-term care,'" says Shine.
The
insurance route
People buy health insurance or car insurance to protect
themselves in case of illnesses or accidents. In the same way, long-term care
insurance pays for the cost of home care or nursing-home care if and when it becomes
necessary.
As with life insurance, buyers need to be healthy
enough to qualify. Someone who has already been diagnosed with Alzheimer's disease,
for instance, is not likely to qualify for long-term care insurance. You can't
insure a house that's already on fire.
"I tell my clients
that they should explore long-term care insurance if they're healthy enough, if
they can afford it, and it won't affect their lifestyle," says Rosenberg.
"The cost of an entire lifetime's premiums typically will never equal the
cost of half a year's long-term care."
Shine provides
prices for a standard policy that pays $160 per day with a 90-day elimination
period (which means that the benefits won't start for 90 days). The policy provides
coverage for five years and is priced for two different age groups. These premiums
will vary from state to state.
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Sample policy prices |
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| 50-year-old |
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$2,000
to $2,900 per year for a single person |
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$2,600
to $4,600 per year for a couple |
| 65-year-old |
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$3,100
to $5,300 per year for a single person |
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$4,800
to $8,500 per year for a couple |
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In
general, you pay those premiums until your benefits actually begin, although some
plans are designed to be paid off in full within a particular time frame, for
example, 10 years.
Who
should get it?
It's unlikely that someone in his
20s or 30s is going to invest in long-term care insurance unless it's offered
through an employer. Both Rosenberg and Barron suggest that people between the
ages of 55 and 65 are ideal candidates.
"I
think it's important to point out that most people are as healthy as they're ever
going to be -- today," says Barron. "So it's hard to tell a 50-year-old
that it's not appropriate for them to consider it." |
