Long Term Care Insurance -- how do you expect to die?
Jul 20 '03
The Bottom Line Cover your assets.
As always, in financial matters, the answer is it depends.
First, I need to define Long Term Care Insurance.
It's basically insurance that will cover care in nursing homes, or sometimes home care services.
Policies are not standardized, so you'll need to look at the coverage provided closely. At the present time, Medicare does not provide LTCI, but Medicaid does, at least for nursing home care.
Factors to be considered include:
How do you expect to die? If by a heart attack, automobile crash, shot by a jealous spouse (yours or someone else's), knifed by a stalker, etc., then you don't need this. If through a progressive illness, you might. Consider your family history for clues.
Do you have any money? If you've got a couple million lying around that you don't need, you probably don't need this insurance. If you have NO money put away, you may be able to get by on Medicaid. In the intermediate case, if you have no one to leave your money to, you may be able to pay for the nursing home care until you run out of money, and then go on Medicaid. (It's possible for a married couple, for one of the couple to have assets, but for the other qualify for Medicaid, under some circumstances. See a lawyer.)
Factors to be considered in individual polices include:
Maximum daily payment. Most insurance companies recommend that you make it at least the average cost of LTC in your area, but, if you're willing to make up the rest with your other assets, you may choose a smaller amount.
Inflation Adjustment: Some policies automatically index the benefit for inflation. Some of those also index the premium. Some policies allow you to buy additional insurance corresponding to an inflation index; those usually recompute the premium as if you had just bought the additional insurance at that age.
Maximum payment period. Usually one to five years, although I've heard of some unlimited policies.
Elimination period. You usually have to pay the first 30-180 days on your own.
Precise payment calculation. Some policies will pay more than the daily limit per day, but limit the total payment to the product of the daily limit and the total time period. Others will only pay the daily limit, and only for the number of days indicated in the maximum payment period. Still others will only pay during the maximum payment period; i.e., if you policy limit is 3 years, and you are committed on 6/6/4, the policy runs out on 6/5/7 (disregarding the waiting period).
Home care services. Almost all policies pay for home care at a specified fraction of the maximum daily payment for a year. Some pay for the full maximum payment period, and some others pay until the total dollar amount is gone, regardless of the type of services provided.
Additional factors to be considered:
Premiums on LTC policies are deductible as medical expenses, although most people won't reach the 7.5% of Adjusted Gross Income for any medical expenses to count.
Payments for long term care are also deductible as medical expenses.
LTC policies cannot be canceled only for a few reasons; the company dropping out of the business entirely is the only one I'm aware of. Your policy cannot be canceled for such reasons as your having a disease which makes you more likely to use it.
Our decision
My father-in-law died of a debilitating illness, although he was only a care facility for less than a year, and it was considered a medical care facility rather than an assisted living facility. My mother-in-law suffers from senile dementia, and we're currently providing in-home care out of her money, and out of ours if she runs out. My mother died suddenly a few months ago. My father, so far, is not having much trouble living on his own, but his sister died of complications of diabetes, and his brother is in an assisted living facility. He does show signs of needing help with cleaning. My wife and I have enough medical expenses that we can use them for itemized deductions, even without the deduction for LTCI. I'm in my mid 40s and my wife is in her mid 50s.
We intended to get coverage in July 2001, when I became eligible for group rates through my employment, and actually obtained coverage in January 2002 during the first open enrollment period after LTC was offered. We selected a benefit comparable to the average cost in area. The group policy has the last inflation adjustment method I mentioned above, offered approximately every 3 years, and the offers are stopped after they're not accepted twice.
 |
|
|
|
|
|
|
Epinions.com ID:
Arthur.Rubin
|
 in Personal Finance |
 in Personal Finance |
 - Top 500 |
|
Member: Arthur Rubin
Location: Brea, CA, USA
Reviews written: 97
Trusted by: 109 members
About Me:
Expert in mathematics, computers, income tax, with a wide variety of interests.
|
|
|
© 1999-2009 Shopping.com, Inc.