Real Estate Matters_May

Long-term Care Insurance Provides More Time in Your Home

Financial planners have been sounding the alarm that Americans aren’t saving enough money and that a lack of funds eventually may tarnish the golden years for many people.

A recent Wall Street Journal Online/Harris Interactive Personal Finance Poll bears out financial planners’ findings. It found that 56% of adults aged 45 to 54 and 39% of adults aged 55 and over don’t think they’ll have enough money to finance their potential long-term care needs as they age. Nonetheless, only nine percent have purchased long-term care insurance (LTC insurance), an insurance product that provides care when you have an illness or disability for which you need care for an extended period.

Celia Mason, a San Ramon, Calif.-based independent insurance and financial services consultant, says denial frequently drives people’s procrastination. Many don’t believe they’ll have to face the physical challenges of aging. “But it’s inevitable because we’re living longer,” she comments.”

Moreover, people don’t realize how costly nursing care is. According to the 2005 MetLife Market Survey of Assisted Living Costs, assisted living costs in the U.S. increased 15% between 2004 and 2005. The average monthly base price for assisted living residences rose from $2,524 in 2004 to $2,905 in 2005. The highest cost was reported in Boston at $4,629 per month, while the lowest was Jackson, Mississippi at $1,642. The

study was conducted for the MetLife Mature Market Institute^® by LifePlans, Inc.

Some people think they’ll pay for services as they go or rely on spouses and family for care as they

age. But paying costs out-of-pocket can erode a couple’s financial security and leave a surviving spouse in dire financial straits. Moreover, it’s important to be realistic about the rigors of home

care. “I don’t know too many women who can lift a man off a bed or floor,” Mason comments.

Expansive benefits

One great misconception about long-term care insurance is that it only covers nursing home care. Not true. A comprehensive policy provides care in various settings, including skilled nursing facilities, assisted-living facilities, adult daycare centers and in clients’ homes.

To accommodate home-based care, LTC policies cover more than just medical services. For instance, such insurance can provide for assistance with dressing, bathing and feeding and policies can also cover things like transportation, modifying a house to make it safer or more accessible, and paying someone to run errands.

Coverage is based on a doctor’s plan of care for patients, according to Mason. “A doctor’s plan could indicate a client needs help with bathing and dressing, as well as meal service, house cleaning and even snow removal. LTC insurance could provide for those things,” she comments.

Buy the best

When buying a policy, it’s important to understand exactly what you’ll get. “The amount you receive depends on what you buy at the front end,” explains Mason. “Buy as much as you can afford now. Later, you can reduce benefits, but if you want to raise benefits, you’ll have to go through the application and underwriting process from scratch. You’ll be older and it’s likely that the rates will be higher,” she adds.

There are several important considerations. One is the waiting period before you can draw on benefits. The elimination or deductible periods are the number of days you’re in a nursing home or the number of care visits you receive at home before a policy’s benefits kick in. During the elimination period, you’d be responsible for paying for your care. The shorter the elimination period is,

the more expensive the policy tends to be.

Another consideration is the daily dollar value of care and whether inflation is factored in. That is, a $200 daily benefit sounds like it would provide a lot of care, but how much care will that dollar amount provide 25 years from now? Be sure the policy factors in inflation.

One more matter to contemplate is years of coverage. That is, will the policy care for you for three years, 10 years, or for your lifetime? The point is critical because people are living longer. Just consider Ronald Reagan, who required more than a decade of care for his Alzheimer’s disease.

Get an early start

The younger and healthier you are, the more likely you are to get the best rate when purchasing LTC insurance. Premiums rise as you age, and Mason says it’s never too early to buy LTC insurance. “Don’t buy a policy when ‘the house is on fire.’ Buy it when you’re a younger, healthier Senior because there’s not automatic acceptance and people with certain conditions won’t be insurable,” she comments. In fact, more than half (57.2 %) of people who apply for LTC insurance after their 80th birthday are declined coverage, according to a national study reported in the January/February edition of Long-Term Care Insurance Sales Strategies magazine.

If you have a family history of debilitating diseases, the urgency is great. “If you have a grandparent with Alzheimer’s, buy LTC insurance right away,” advises Mason.

LTC Insurance Tips

1. Buy a policy while you’re a younger Senior both to keep costs lower and to increase your chances of qualifying for LTC insurance.

2. Buy the best policy you can afford.

3. If still working and your employer offers LTC insurance, sign up. Often it’s easier to get LTC insurance when multiple employees are enrolling in a group plan. Sometimes individuals can be guaranteed coverage without providing a medical history.

4. Be honest about medical conditions. Insurers can deny coverage if you’ve lied about your medical history.

5. Understand what you’re buying and what you’ll receive for your dollars before buying any kind of insurance.

Additional information:

America’s Health Insurance Plans, Washington, D.C., has an on-line guide to long-term care insurance that can be found at www.ahip.org/content/default.aspx?bc=41|329|450
MetLife offers Long-Term Care Insurance: The Essentials. It’s available online at www.maturemarketinstitute.com/ with their search box, by calling (203) 221-6580, or by sending an e-mail to MatureMarketInstitute@metlife.com. Indicate if you live in Texas or Oklahoma because there’s a booklet specific to each of those states.
The Complete Idiot's Guide to Long-Term Care Planning, by Marilee Driscoll (Penguin Group (USA) Inc., 2003)

Real Estate Matters

Silver Edition. News & Issues for the Mature Market

Real Estate Matters: News & Issues for the Mature Market