Have you ever worried about medical costs consuming your savings?
Rising medical costs and longer life expectancies are making this a concern
for many. There are some government programs like Medicaid and Medicare that
can help cover some expenses of long-term care. However, there are
restrictions on what is covered and qualifying for these programs may only be
possible after you have used all your personal savings.
With long-term care insurance, you will be in a better position to get the
care and services you need. You will have a greater opportunity to choose the
type of care you want. You can protect your other assets and be in a better
position to leave assets to heirs when you pass away. You will be in more
control of your financial future.
The Costs of Long-term Care
Several studies have found that a year's stay in a nursing home can cost
over $50,000. Even the cost of having a skilled professional come to your
home and provide care three times a week can be over $15,000 annually
depending on what type of care you need. While life expectancies are
increasing, amount of care we need (and its cost) seems to be increasing even
faster.
Paying for Long-term Care
Neither Medicare nor private medical insurance cover most long-term care
costs. Medicare will pay for some special services, but most people receiving
long-term care need help with things not covered like bathing, dressing and
eating. In most cases, Medicare does not cover these.
Medicaid will cover nursing home care, but it functions like a safety-net
type program. To get Medicaid help, you must meet federal and state
guidelines for income and assets. Many people start paying for care out of
their personal assets and then qualify for Medicaid when their personal
assets are depleted. While some assets and income can be protected, by the
time you qualify for Medicaid, you will probably have used up most of the
assets you had hoped to pass on to surviving family members.
Long-term care insurance is another way to pay for some
or all of your long-term care. This type of insurance was introduced in the
1980s as nursing home insurance but now covers a great deal more. The
greatest benefits of these policies are that they enable you to make more
decisions about your care and they help protect your other assets.
Some Guidelines
1. Usually, age 50 is the time to consider a long-term care policy. Younger
than that, you probably do not need it and older than that, you may have a
condition that could prevent you from qualifying or result in higher
premiums. The earlier you buy the coverage, the lower the premiums.
2. Be sure the insurance company is financially sound. You may qualify for
benefits for a long time and you want the insurance company to be around. You
can get ratings reports from your agent or at the library on insurance
companies.
3. Review what types of expenses are covered by the policy. Some policies
provide coverage for only some services, a limited period of time or only up
to a certain total dollar limit. As you would expect, the more services
covered, the higher the premium.
4. Get the coverage you need. Many experts suggest at least three years'
coverage. While three years in a nursing home today may cost $150,000, be
sure the policy you are considering protects you against medical cost
inflation.
5. Review the elimination period. This refers to the amount of time between
you start receiving care and when your insurance starts paying.
6. Be sure to understand what makes you eligible for benefits.
7. Make sure the policy is guaranteed renewable. This does not necessarily
mean that your premiums will not rise. It does mean you can still get the
coverage.
Summary
Long-term care insurance can be a critical part of your overall financial
plan. If you have substantial assets and do not want to rely on Medicare or
Medicaid, you should consider it. When shopping for a policy, talk to several
companies, ask a lot of questions and be sure to understand all the terms of
the policy.
