posted by Chris | Perhaps the most perplexing issue I encounter as a financial planner is the response to the question of long term care insurance. The range of emotion that people express when I question exactly how they will pay for their care as they age, is surprising. Life, auto, health, and homeowners insurance are all necessary and purchased accordingly.
Long term care is generally defined by an individual’s inability to perform the normal activities of daily living (ADL) such as bathing, dressing, eating, toileting, continence and moving around. THe need for long term care can result from conditions such as spinal cord or head injuries, stroke, AIDS, mental illness, Alzheimer’s disease or other forms of dementia, or physical frailty due to advancing age.
Long term care is essentially room and board – not physician, therapy or nursing care.
You may have approximately a 50% chance of needing Long Term Care (LTC) at some point in your life. LTC insurance bridges the gap that exists from your Medicare and health insurance. In fact, Medicare and health insurance policies pay only a small portion of long term care costs.
If you know there is a good chance that you will need LTC insurance, why wouldn’t you pay for it? Do you really want to depend on family and friends to care for you, or to give your spouse a reprieve? Is it fair for your spouse to have to be your sole care giver when he or she is in their golden years too?
Men are not off the hook, as almost half (44%) of all caregivers are men.
I have found that the cost of one month of care equals approximately what your annual premium for long term care insurance.
Having accepted the need for a long term care policy (to shift the economic burden from my family and estate to an insurance company) how do I select a policy?
Here are a few considerations:
1. Amount of benefit: how much per day ( $ 100 per day, $200 per day ) is the eligible benefit?
2. Inflation protection: since costs inevitably increase, should one select a simple or compound inflation protection and what % rate of increase ( 3%, 4%, 5%) ?
3. Place of care: will it allow home health, assisted living and nursing home?
4. Waiting period: should one take a 30, 60, or 90-day waiting period prior to benefits being paid?
5. Benefit period: should one get a 3 year, 5 year or lifetime policy?
As always, you should review your anticipated retirement income stream to determine how much long term care insurance you should purchase. Consult your financial planner and long term care sales person. Spend time on the internet reviewing various long term care policies to choose which is best for you.
If you need long term care, your spouse and children will be emotionally affected by your condition. Why not relieve your spouse and children of the burden of caring for you? That would be a gift to your family.
Christopher J. Conner
Certified Financial Planner TM
Certified Fund Specialist
5200 W. Newberry Road E-7
Gainesville, Florida 32607
352-225-3132 (Fax) 352-225-3784
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