Long-term care refers to assistance with the very basic, everyday activities that most of us can do for ourselves. These are called Activities of Daily Living (ADLs) that many people, due to their age, illness, injury, or cognitive impairments cannot perform without any assistance. Such activities include: eating, dressing, and bathing.
Anyone who is age 45 or older should consider long term care insurance when planning his or her insurance needs. Depending upon a person's particular insurance budget, there may be other insurance needs that deserve priority. Certainly, the purchase of long-term care insurance should never create a financial hardship.
The purpose of Long Term Care Insurance (LTCi) is to provide the insured with normalcy during the time of need. LTCi is designed to maintain your wishes for a better living:
- Live at Home: It is reported that nursing homes could use up one's financial savings within 12 months of residency1.
- Freedom from financial burdens: Many Americans end up selling their assets such as their houses, and use up their savings and other investment accounts (i.e. retirement) in order to pay for their Long Term Care costs. Eight hours of daily care could cost up to $73,000.00 per year2. With inflation protection added to your LTCi you can protect your monthly benefit from expected increases in LTC rates.
- No burdens on family members/ caregivers: 78% of individuals who receive LTC rely on family and friends to assist them with Activities of Daily Living.
In a 1994 research, owners of LTCi listed the following reasons for the purchase of their policy in order of importance3:
- To avoid depending on others for care and to reserve my independence
- To protect my assets
- To guarantee that I will be able to afford needed LTC services
- To enable me to choose the LTC services that I want if I ever need them
- To protect my family's standard of living if I ever need LTC services.
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Statistics:
Current statistics posted on the National Clearinghouse for Long-term Care Information4, support that in 2008 9 million Americans age 65 and over will need long-term care. This number will increase to 12 million by 2020. Also noted is the fact that 40% of those who receive long-term care today are adults 18 to 64 years old. The Health Insurance Association of America (HIAA)5 states that 10% of people age 65 will most likely remain in a nursing home for 5 years. Additional statistics through HIAA prove that the age group of 85 years old and above is the fastest-growing segment of the population. The assumption is that the number of people who may need Long-Term Care in the future will keep increasing. In addition, women face a greater risk of needing long-term care due to the fact that they outlive men by several years.
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The following are factors that one should consider when analyzing his/her need for coverage:
1.Scope of facilities in which treatment must be performed (e.g. nursing home vs. assisted living)
2. Scope of "professionals" who can perform the care (e.g. nurses vs. aids.)
3. How benefits are paid: Reimbursement or indemnity
4. Maximum lifetime benefits
5. Maximum daily benefits
6. The conditions that "trigger" benefits
7.Elimination (or waiting) period before benefits begin
8. Inflation protection
9. Qualified or non-qualified policy
10. Discounts for husband and wife
11. Restoration of benefits
12. Waiver of premium if benefits are being paid
13. Nonforfeiture benefits if you stop paying premiums
14. Premium paying period
15. Respite care
Resources:
1 Darras, Frank N., “New Challenges for Those Approaching Retirement,” www.ProducersWeb.com, December 8, 2006.
2 At the 2006 average hourly rate for home health aides of $25, three hours per day of home care total $27,375 annually.“National Spending for Long-Term Care Fact Sheet,” Georgetown University Long-Term Care Financing Project, January 2007.
3 Health Insurance Association of America. Who Buys Long-Term Care Insurance?:1994-95 Profiles and Innovations in a Dynamic Market. 1995; 29.
4 U.S. Department of Health and Human Services, National Clearinghouse for Long-term care Information.
Myth #1: My Health and Disability Insurance, Medicare and/or Medicaid will pay for my Long Term Care costs: This is the notion that a lot of people have when they refuse to buy LTCi. Neither a Health and Disability Insurance, Medicare or Medicaid will pay for LTC. A Health Insurance will pay for a short term medical care, and a Disability Insurance will compensate the patient with a portion of his/her salary, which is needed for personal living expenses such as mortgage. Medicare covers adults of 65 years and older and those with a disability. Also, Medicare will cover expenses of up to a certain amount of days and your choices are limited. Medicaid will cover long term care costs only after you have spent your savings and assets.
Myth #2: I am too young to think of LTCi: As we mentioned above, 40% of those who need LTC are adults 18-64 years old. LTCi does not only cover illnesses due to aging, but also injuries caused from accidents, stroke etc.
Myth #3: I will not need LTCi: No one can predict what will happen in the future. The fact is that the 85 years old and above population is the fastest growing segment in America. Now, more than ever before, people live longer, and it is expected that the number of seniors who live in nursing homes will increase within the next few years.
Myth #4: LTCi is too expensive and I cannot afford it: The risk of not having LTCi is far more expensive than purchasing one.
Myth #5: Family members will take care of me: Even though family members may be willing to take care of each other, it is a time consuming obligation that will end up causing financial hardship. In addition, taking into consideration today's cost of living, rarely do we ever find a one-income household.
If you would like to listen to our radio show regarding Long Term Care click here or go to our Radio Talk Show page.
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