General Information- from AgeNet.com
Providing appropriate long-term care for an elderly parent
can be expensive. Costs for nursing home care range from
$30,000 to $60,000 annually, with approximately 50% of the
cost paid by individuals. To ease the financial burden,
many individuals purchase long-term care insurance. Long-term
care insurance pays a fixed amount for each qualified day,
either in a nursing home or at home. The benefit is paid
for a specified period of time, typically several years.
Without this type of insurance, an individual is required
to pay from his or her personal income and savings. After
the individual's savings has been depleted, care may be
paid by Medicaid, a federal-state program that currently
pays for medical and long-term care for those with limited
financial resources.
The peace of mind that long-term care insurance provides
will usually enable an individual to leave an inheritance
for their loved ones. However, premiums increase with the
age at which you buy a policy. A policy that may cost $1,700
annually for a 65-year-old person, may cost $4,500 annually
for someone who is 75 years old. A long-term care policy
may not be affordable for individuals with modest incomes.
Although individuals purchase long-term care insurance
for many reasons, the most important reason is to protect
their life savings. Unless individuals have considerable
assets, they may spend more money on a policy than what
they have in savings. A 70-year-old individual protecting
$20,000 in savings would spend $20,000 in premiums in approximately
eight years. An individual should have over $40,000 in savings
before considering the purchase of a long-term care insurance
policy. A couple should use $100,000 in savings as a benchmark
for this approach.
Another consideration for long-term care insurance is
the desire to protect savings. Couples need to protect savings
in case one spouse needs long-term care. Without insurance,
savings can be easily eliminated or greatly diminished.
Current spousal impoverishment laws protect a limited
amount of a couple's assets. At the time of admission to
a nursing home, a couple's combined assets, excluding a
house, car, and personal belongings, are to be considered
available assets for long-term care. Current federal law
allows one-half of available assets, with a minimum of $14,148
and a maximum of $70,740, to be protected for the spouse
who remains in the community; the remainder is eligible
to pay for nursing home care. An individual should have
$40,000 over the amount protected by the spousal impoverishment
law before considering the purchase of long-term care insurance.
The length of time a long-term care policy will pay is
usually stated in days: two years is 730 days; four years
is 1,460 days. Some insurance companies offer a lifetime
benefit. Premiums for long-term care insurance are level.
This means that the insurance company is unable to raise
an individual's premiums unless all policies for a class
of policyholders is raised.
A policy paying $100/day for nursing home care may cover
a substantial portion of the today's nursing home cost,
but it will only cover a small portion of the expense in
20 years. Many policies offer an inflation adjustment that
increases the benefit amount over time, though policies
differ on how inflation is calculated. Some policies provide
an automatic adjustment, inflating the original benefit
amount by 5% for either 20 years, or until the individual
reaches the age of 86 years. If you are under the age of
65 when you purchase a policy, adjusting for 20 years is
your best option. Some policies will inflate the benefit
amount over the lifetime of the individual.
Besides an individual's age, the policy premium is related
to the benefit amount, the length of the benefit period,
and the deductible period. The deductible period is the
number of days you pay for care before the policy begins
to pay. Typically a deductible period will range from 20
to 100 days. The shorter the deductible period, the more
expensive the premium.
Sheri D. Fanning,RN,C CareMate: Elder Care Planning Services
400 South Water Street Sparta, WI 54656 608-269-5888 phone
608-269-1837 fax Sheri@caremate.com
www.CareMate.com
