Do You Need LTC Insurance?
People work hard to save for their “golden years”. However, once the golden years are reached, one serious health event may cause a person to spend their life savings on long term care (LTC).
How much? Currently the average cost of a one year nursing home stay in the Peoria Area is between $60,000 and $85,000 (depending upon where you stay). According to Genworth (a popular long-term care carrier) the cost of nursing home care has risen 3% annually for the past five years. Medicare covers only about 3.6% of all long term care costs, because it provides limited coverage for SKILLED nursing care only. Unfortunately, more than 90% of individuals currently in nursing facilities are receiving CUSTODIAL care, for which Medicare pays nothing. Skilled is where a high level of medical case is needed verses custodial care where a non-skilled person could be trained to help the patient.
It will never happen to me! Consider the following facts: According to the U.S. Department of Health and Human Services, 43% of those turning age 65 (more than 50% of women, and nearly 33% of men) will require long term care in a nursing home during their life. Seventy percent of all couples can expect at least one partner to use a nursing home after age 65.
The risk! Forty percent of people over age 65 will enter a long term care facility, half of whom will stay six months or less, and the other half of whom will stay an average of 2.5 years. Clearly, the risk of a long term confinement in a nursing facility is one of the greatest hazards faced by today’s retiree. That is, you may need to deplete your “nest egg” to pay for home care or an extended stay in a nursing home.
So where do I go from here? There is currently growing popularity of long term care and home health care insurance policies; but the industry has several ways plans can be structured. First, gather information on the types of plans:
A modified LTC policy: These plans are not designed to pay for a stay longer than one year. However, they work well for the 50% of the people requiring care of 6 months or less. These plans seem to be rarely offered, but can help greatly for these 50% of people.
Traditional LTC policies: These plans were first written around 1980. These are for a person paying as they go for coverage. The minimum benefit period is 2 year s and the maximum was a lifetime (now 6 – 10 years). Premiums on these plans may rise in the future.
Life or Annuity LTC Coverage: LTC benefits may be added as a rider (addition) to a life insurance policy or an annuity. These plans pay for LTC, but will usually have a death benefit and an amount of money that is available if the person decides to terminate the policy.
As with all insurance plans the definitions of care are critical. One company may cover a person in an assisted living setting, and another may not due to the definition of care needed. e.g. For cognitive impairment: “Substantial care” means a person needs some care – possibly hands-on care with bathing or dressing, but at a minimum care in a safe environment. “Continual care” means one needs to be supervised 24 hours a day. “Continual care” would most likely call for a secured memory care unit and is much more restrictive than substantial care.
This is just the beginning of information on LTC policy types. You are invited to attend our April Seminar on Saturday, April 18th to discuss types of LTC plans, benefits, how they work and where they fit well, Feel free to contact our office for further information on Life, Annuity, or traditional long term care products and companies.