Tuesday, August 4, 2009

Long Term Care

Who can benefit from Long Term Care Insurance?

In the 90’s my grandmother had to go to a nursing home, and had no choice in which home to go to because she had no long term care insurance. She used up all of her assets very quickly, and then was covered by Medicaid. She was never quite happy in the nursing home, and I always wished we had other choices available.

Long term care insurance is a tool for those who want to remain independent and desire the ability to choose the setting for their care. While it was begun in the early 80’s as nursing home insurance, it has changed a lot since then. Now the coverage includes not only nursing home care, but services in assisted living facilities and adult day care centers, as well as home health care, and respite care for the care giver.

As we live longer, more people will need some form of long term care. Yet most of this care is increasingly provided at home. Over 12 million Americans (of any age) need long term care, but only 2.4 million live in nursing homes. Further, younger people often have need of this care as well. It is estimated that 40% of the people receiving long term care are between ages 18 and 64.

What triggers long term care insurance? Usually a policy pays benefits when you cannot do two or more “Activities of Daily Living” (ADL’s), either because of old age, mental or physical illness, or injury. There are six activities of daily living, developed through years of research: eating, bathing, dressing, toileting, continence, and transferring (getting out of a chair or bed). Many policies also pay benefits for cognitive impairment – for example, if you develop Alzheimer’s disease, but can still perform the ADL’s.

If you have significant savings, long term care insurance is a way to protect those assets in the case that you need long term care. Consider the costs of care in a 2008 survey. In Seattle a room in a nursing home cost $277 a day, and the rest of the state averaged $189 per day. A one bedroom unit in an assisted living facility cost $3,340 per month in Seattle, and $2,890 in the rest of the state. A home health aid costs $22 per hour, or just over $45,000 per year. These costs could quickly consume a very healthy savings account.

When looking for long term care insurance, keep in mind these questions. What services are covered, and how much would be paid for each service? How long would the benefits last, and does the policy have a lifetime maximum benefit? Will it pay benefits based on expenses incurred, or a set dollar amount? How many days would you wait before benefits begin? Does the policy offer an inflation feature? Is there a waiver-of-premium provision for once you enter a care facility?

Then, based on your age, and family situation, you can map out your goals for long term care insurance with an insurance professional, and craft a policy that works best for you.

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