How do you decide whether to buy insurance or utilize your own financial resources to pay for a loss? When considering Homeowner Insurance, you consider the various potentials for a loss, the cost to replace your home, and your ability to afford that loss. 1/1200 homes will experience a major fire loss but 65% or more will have a loss that exceeds all premiums paid over the prior 10 years. If you have a home; you are usually required by the mortgage company to have a policy. Even though the odds are against having a total loss fire, the other coverages included make it so that few would risk not having insurance for their home.
Only 1/250 cars are involved in total loss accidents, but most cars during their useful life will be damaged in an accident. All people are supposed to insure their cars for the damage they cause to others (liability) but many go without coverage for damage to their car. They assume the financial risk of damage after comparing the potentials for a loss to the funds they’d recover.
Only 1/50 people will have a hospital stay relating to medical treatment, but nearly all of us will receive medical care not requiring hospitalization and we recognize the catastrophic expenses we could incur if a health condition developed. It may be expensive, but most of us have health insurance with a goal of protecting against the catastrophic impact an illness or injury could bring. Deductibles help us control some of those insurance costs, but few will go without health insurance.
1/3 of us will need long term care in our lifetime but less than 20% of us have Long Term Care Insurance. Once educated, it’s hard to understand why some people put their heads in the sand assuming they’ll never need it. You are likely to need long term care in your lifetime! Do you plan for it through investments or through insurance?
What Is Long Term Care Insurance: It is the care a person needs due to an illness, accident, or chronic condition. 85% takes place at home with family member support, adult day care, and in assisted living facilities. That remaining 15% takes place in long term care facilities; commonly called nursing homes.
There are LTC Insurance policies that will pay for the Assisted Living facility, the Nursing Home and extended Rehabilitation hospital stays. Limits and deductibles vary offering you options. One popular option is a couple’s policy. When one pre-deceases the other with LTC benefits unused, the remaining benefits are then credited to the surviving spouse.
Historically, it has been more common for a couple to have one spouse need Long Term Care (LTC) in a facility while the other may spend little to no time in such a facility. That happens when there is a spouse who is physically and mentally capable to care for their partner. After their partner passes, no one is left to care for them, except a LTC facility. Couples planned their later year’s financial plans for that. Divorces represent the failed vow of “until death us do part” as the numbers of baby boomers entering LTC facilities grows. It’s tough to endure as a care giver without the benefit of many years building a relationship. Without the long term relationship, many seek the easy solution of a LTC facility.
Who Pays for LTC? Unfortunately you have a limited number of days that is paid by Medicare (Social Security). Most LTC expenses are paid out of people’s pockets until nearly all personal financial resources are exhausted effectively making you destitute. At that point you “become a ward of the State” as a Medicaid Patient (State run).
The cost for LTC varies by the level of care being provided. The Assisted Living facilities popular for many who don’t need skilled care but benefit from having meals prepared, housekeeping done for them, and generally having someone to keep an eye on their wellbeing. With the growing demands for these facilities, have come modern hotel like facilities complete with pools, exercise rooms, bars, craft rooms, and multiple activity offerings on a daily basis. You pay for these facilities with a monthly rent check of $5,000 to $6,000. As frailties expand comes the need for skilled care facilities with a monthly cost of about $9,000. Because the modern facilities are so popularly sought after, those lacking the financial resources are relegated to the old warehouse like facilities.
Contrary to what many expect, retirement health plans, Social Security, health insurance plans (Aetna, Blue Cross and United), the Medicare supplemental plans, or a disability insurance plan from their working days, are not plans that pay for LTC; those will only pay for a specific period of “skilled medical care’’. The LTC pays for your day to day chronic care needs such as helping you bath, getting dressed, going to the bathroom, and eating.
How do I get this Coverage? At present there are less than 15 companies selling Long Term Care insurance. You want one that has been involved in LTC Insurance for several years, has a good track record of paying claims, and has strong company financial ratings. Some of the top carriers are Genworth, National Guardian, New York Life, Mutual of Omaha, and Transamerica. These policies are best purchased through an insurance agent you are comfortable with.
When should I purchase a LTC policy? The need to purchase LTC insurance is probably more crucial today than ever. While people in their 50’s can lock into lower rates now, that does not mean it’s not suited to a person in their 60’s. The people in their 50-60’s likely do not have a specific pension, a well-funded 401K program or simply an adequate supply of savings to fund the over $200,000 it will cost to house someone in a LTC facility for the average last 2 years they spend in such a facility. While LTC insurance is not cheap, it can save you from blowing through everything you’ve saved to one day pass on to your family. There is nothing else that will guarantee that physically, emotionally, and financially you will be protected.